Gravita India Ltd
NSE:GRAVITA

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Earnings Call Analysis

Q2-2025 Analysis
Gravita India Ltd

Gravita's Strategic Growth and Expansion

Gravita India Limited showcased a robust strategic move in its latest quarterly earnings call. With a strong focus on increasing its capacity and geographical expansion, the company announced plans for setting up its first rubber recycling plant in Romania. This plant, with a capacity of 17,000 metric tons per annum, represents the company's commitment to diversifying its recycling operations globally. The investment is valued at approximately INR 40 crores, with expectations for growth across the European market via strategic partnerships.

Financial Highlights – Q2 FY '25

In terms of financial performance, Gravita reported an impressive consolidated revenue for Q2 FY '25, amounting to INR 927 crores, marking an 11% increase year-over-year. The revenue mix showed that 47% was derived from value-added products, a vital strategic goal as Gravita aims for 50% by FY '28. Adjusted EBITDA rose to INR 101 crores, reflecting a 27% increase year-over-year, with EBITDA margins increasing to 11%. This solid growth in profitability showcases the company's effective cost management despite only an 8% volume growth.

Strong Year-to-Date Performance

For the first half of FY '25, consolidated revenue grew by 19% to INR 1,835 crores, with a 27% increase in net profit (PAT) at INR 139.33 crores. This demonstrates a PAT margin rise to 7.6%. The increase in cash flow from operations to INR 73 crores also signals effective cash management strategies. Overall, Gravita's focus on holding operational expenses while achieving higher volume throughput underscores its strong operational framework.

Future Guidance and Growth Projections

Looking ahead, Gravita has laid out ambitious growth targets. The company is eyeing a CAGR of over 25% in volume, with profitability growth projected to exceed 35%. They aim to grow the overall Return on Capital Employed (ROCE) above 25%, further emphasizing their goal of expanding non-lead revenue segments to over 30%. The firm expects to see lead growth rates of 17%-20%, while plastics and aluminum are projected to increase by approximately 40%-45% by FY '28. This diversification reflects the company's forward-thinking approach in different industrial sectors.

Competitive Market Dynamics

Gravita operates in a competitive environment undergoing structural changes due to regulatory reforms in waste management. The transition towards organized recycling is mirrored in their increased domestic scrap sourcing—growing by 140% year-over-year. The new battery waste management rules are expected to bolster supply, positioning Gravita favorably against competitors as the market continues to expand with higher material recoveries. This also aligns with their strategic plan in adopting eco-friendly practices across all operational fronts.

Operational Efficiency and Margin Enhancements

A key factor in Gravita's success has been its ability to leverage arbitrage opportunities in international and domestic markets, leading to improved EBITDA per ton across its various product lines. The enhanced margins experienced—22% and 57% increases in lead and aluminum, respectively—have allowed the company to maintain competitive advantages in pricing despite external market fluctuations. Management suggested that while the profitability increases stem from improved efficiency, they project sustainable margins around INR 18 to INR 19 per kg moving forward.

Risk Management and Hedging Strategy

Gravita has been prudent in managing commodity price risks through effective hedging. This is evidenced by their strategy to hedge 10%-15% of their market volume, which aligns well with fluctuating lead prices. As fluctuations in commodity prices become more prevalent, the firm's ability to hedge will be crucial for maintaining profitability. Their awareness of price cycles and operational adjustments ensure that they can navigate market volatility effectively.

CapEx Plans and Future Investments

The company approved raising funds up to INR 1,000 crores for CapEx, focused on expanding current capacities and exploring mergers and acquisitions. Current investments of INR 600 crores will support initiatives in lithium-ion, paper, rubber, and steel recycling, underlining their strategy to solidify market presence and improve margins through diverse product offerings. With additional investments planned in capacity building and sustainable practices, Gravita aims to leverage its sector leadership in the coming years.

Earnings Call Transcript

Earnings Call Transcript
2025-Q2

from 0
Operator

Ladies and gentlemen, good day, and welcome to Gravita India Limited Q2 FY '25 Earnings Conference Call hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Jenish Karia from Antique Stockbroking. Thank you, and over to you, sir.

J
Jenish Karia
analyst

Yes. Thank you, Del. Good morning, everyone, and thank you for joining the 2Q FY '25 Post-Results Conference Call of Gravita India. I would like to thank the management for giving Antique Stockbroking the opportunity to force the call. From the management, we have Mr. Yogesh Malhotra, Director and CEO; Mr. Sunil Kansal, Director and CFO; and Executive Directors, Mr. Vijay Pareekh, and Naveen Sharma. Without further ado, I now hand over the call to management for their opening remarks, post which, we shall open the call for Q&A. Thank you, and over to you, sir.

Y
Yogesh Malhotra
executive

Thank you, Mr. Jenish. Good afternoon, ladies and gentlemen, and welcome to our Q2 and H1 FY '25 earnings call. I trust you have had the chance to go through the earnings presentation and financial results that we have uploaded on the stock exchanges. I'm pleased to announce that Gravita has delivered outstanding performance in both financial and operational aspects during Q2 and H1 FY '25. Before we dive into the results, I would like to discuss about some key strategic highlights and project updates. Gravita's step-down subsidiary, Gravita Netherlands has signed a Memorandum of Understanding to acquire a waste rubber recycling plant in Romania from an established local entity with a capacity of approximately 17,000 metric tons per annum.

This acquisition will mark Gravita's first recycling facility in Europe. This aligns with the company's vision of diversification and expansion aimed at replicating our recycling business across various geographies. The acquisition will be carried out by establishing a separate special-purpose [ vehicle ] in Romania, where GNBV will hold 80% equity along with management control, while the remaining equity will be held by local partners in Romania.

The total investment for this transaction is estimated to be approximately INR 40 crores with GNBV contributing around INR 32 crores, subject to comprehensive financial, environmental and legal due diligence. GNBV aims to grow its recycling business throughout the European market by seizing new opportunities and establishing strategic partnerships that drive growth. The Board of Directors have approved raising funds of amount up to INR 1,000 crores. These funds, if required, will be raised for additional CapEx, M&A opportunities, debt reduction and other general corporate purposes. Our progress on setting up a pilot project of

lithium-ion battery recycling and our first Indian rubber recycling plant in Mundra is going as per plan. we expect them to be operational in H1 FY '26. Gravita is strategically advancing to achieve its short-term, midterm and long-term goals set for FY '27, FY '34 and FY '50, respectively, as detailed in its ESG road map. This comprehensive road map outlines the company's commitment into integrating ESG principles into its operations and decision-making processes.

As Gravita progresses along the strategic path, it aims to position itself as a leader in sustainable practices within the industry, ultimately benefiting both the company and the communities in which it operates. The long-term vision will help to drive innovation and strong governance practices will promote transparency, accountability and ethical conduct within the organization. Coming to operational performance. On the capacity expansion front, Gravita is making steady progress towards its goal of increasing its capacity to over 5 lakh metric tonne per annum by FY '27.

The company has strong investment plans of INR 600 crores, which includes CapEx for both existing as well as new verticals like lithium-ion, paper, rubber and steel recycling. The CapEx done in H1 FY '25 is around INR 30 crores, and we are expecting an additional investment of around INR 100 crores to INR 120 crores in capacity buildup in the H2. On the volumes front, we saw an overall growth of 8% in Q2 FY '25. Volume for lead and aluminum showed an increase of 9% and 3% year-on-year to 42,151 tonnes and 3,515 tonnes, respectively. Volume for plastics stood at 3,000 tonnes. Due to strict government regulations under BWMR and the availability of domestic scrap is on the rise, leading to an increase in our sourcing of domestic scrap as well.

In Q2 FY '25, we experienced with 140% growth in the domestic availability of scrap on a year-on-year basis. Coming to quarterly EBITDA per tonne performance. EBITDA per tonne of lead and aluminum increased significantly by 22% and 57% to INR 21,642 per tonne and INR 18,386 per tonne, respectively. The company was able to increase these margins by leveraging arbitrage opportunities between international and domestic markets.

Moving to financial results for H1 FY '25. Consolidated revenue increased by 19% to INR 1,835 crores. Consolidated adjusted EBITDA increased to INR 192.72 crores, up 30% on a year-on-year basis. EBITDA margin stood at 10.5%. Consolidated PAT showed a significant increase of 27% to INR 139.33 crores. PAT margin increased to 7.6%. [indiscernible] is standing strong at 25%, which is in line with company's targets.

Cash flow from operations has increased to INR 73 crores. Coming to financial results for the quarter. Consolidated revenue for Q2 FY '25 increased by 11% year-on-year to INR 927 crores. 47% of revenue came from value-added products, which is in line with our vision of achieving 50% revenues from this category by FY '28. Consolidated adjusted EBITDA increased to INR 101 crores, up 27% and 11% on Y-o-Y and quarter-on-quarter basis, respectively. EBITDA margin increased to 11%.

Consolidated PAT showed a significant increase of 24% year-on-year to INR 72 crores. PAT margin -- in conclusion, Gravita is making significant progress towards it's clear Vision 2028, our strategic emphasis on expanding existing verticals while diversifying into new sectors such as lithium-ion, steel and paper recycling aims to achieve a volume CAGR of over 25%, profitability growth exceeding 35% and ROCE of more than 25%. Additionally, we are dedicated to increasing our non-lead business share to over 30%, utilizing more than 30% renewable energy and reducing energy consumption by over 10%.

Through our successful strategies, which include capacity expansion, diversification both segment-wise and geographically, enhancing the share of value-added products to over 50% and managing risk with back-to-back hedging, we have achieved strong and sustainable margins. With over 30 years of expertise in recycling plus cutting-edge eco-friendly facilities around the globe, our presence in over 70 countries and integrated supply chain, strong CapEx plans and compliance with stringent BWMR and EPR regulations, we are on track to realize our Vision 2028. That's all from my end. I would now request to open the floor for questions and answers. Thank you, and over to you, Mr. Jenish.

Operator

[Operator Instructions] The first question is from the line of Amit Dikshit from ICICI Securities.

A
Amit Dixit
analyst

I have a couple of questions. The first one is on the expected volume growth this year. So while volume growth, if I look at for H1, it was around 12%, 12.5%. So what kind of volume growth can we expect for the full year. And what are the key avenues for this growth between lead, aluminum and paper -- sorry, and plastics?

Y
Yogesh Malhotra
executive

Yes. So the H1 growth rate so far is 17% year-on-year basis. And we are expecting the same -- I mean, as we have given the guidance of around 25% CAGR growth in the next year, it will be in the same vicinity of 25% this year also. The -- there can be some slight difference of 2% to 3%, both downwards or upwards because, as you know, that the growth cannot be absolutely linear. So there may be some difference. And the growth projections for lead is around 17% to 20%. And for plastic and aluminum, it is going to be around 35% to 40% going forward.

A
Amit Dixit
analyst

Okay. The second question is essentially around aluminum. So in the last call, we indicated that we expect the listing of aluminum on MCX -- ADC12, I think, so that we can also hedge aluminum. So I just wanted to get more sense on that? And what could be the aluminum capacity utilization by end of the year?

U
Unknown Executive

Okay. On the part of listing of aluminum contract on MCX, so that is in process and all the approvals to MCX has been received from finance ministry. And we expect that in Q4, this context should be lifted. And on the part of capacity utilization, the -- this year, 2024-'25, the utilization around 45%.

Y
Yogesh Malhotra
executive

And forward in the H2, we expect it to slightly higher capacity utilization because we are increasing the volumes considering this upcoming hedging solution. So we are increasing the capacity utilization closing beyond 50% for this year.

A
Amit Dixit
analyst

Okay. So the sense that I get from both the answers is that H2 should be much stronger compared to H1 on volume front and with aluminum also helping. So we could see a distinctly better profitability in H2 compared to H1?

Y
Yogesh Malhotra
executive

So profitability, again, as we mentioned, that would be in the same range. We expect 25% growth rate in volume terms and around 35% in profitability. This year, if you look at this quarter, as I mentioned in my speech also that there was an upside in profitability. Although the volume grew by only 11%, the profitability went up, EBITDA margins were up by 27%. That was because of arbitrage opportunity. Otherwise, there is some difference, but it will be in the same tune.

Operator

The next question is from the line of Chetan Thacker from ASK Investment Management.

C
Chetan Thacker
analyst

Just 2 questions. One is on the hedge gain that we've seen. What is the quantity against which this has been booked?

U
Unknown Executive

Okay. So what we do is whatever volume we have, approximately 10% to 15% we are doing like -- if you're doing 50,000 tonnes of volume, so approximately 10,000 tonnes we hedge through this mechanism. So whatever hedge quantity is approximately 10,000 tonnes to 12,000 tonnes. That's the -- but it also changes on a day-to-day basis because it fluctuates whenever we do the sourcing on the same day we hedge on the -- we take a sales contract on LME for the remaining quantity, which we are not able to hedge on the physical side. So -- but that quantity changes on a day-to-day basis. But on an average, you can take it 10,000 to 12,000 tonnes.

C
Chetan Thacker
analyst

So this INR 40 crores pertains to 12,000 tonnes per quarter?

Y
Yogesh Malhotra
executive

The turnover is much higher. It's at any point in time, the total hedge quantity is around 10,000 to 12,000 tonnes. But the turnover could be much higher because you do hedging on a daily basis against each and every contract. So the turnover would be much higher than this 10,000 to 12,000.

C
Chetan Thacker
analyst

So then, sir, fair to assume that for this quarter, say, for example, we've got volumes of 42,000. And you would be on an average doing 10,000. But for the quarter as a whole, whatever gains or losses that we see pertains to just 10,000 or it pertains then to the full 40,000.

Y
Yogesh Malhotra
executive

It pertains to full 40,000. So what happens is that once we -- sometimes when we have an ordering in hand or on other side, we have a procurement in hand, then that gets canceled. But whenever there is a lag in between the purchase or the sales, during that time, we go and hedge it on the exchange and then reverse that deal once the lag is complete.

C
Chetan Thacker
analyst

Got it. The reason why I was asking was because we've actually seen lead prices go down on an average this quarter while your realization, if I don't add the hedge gain is also flattish. So just wanted to get a sense of why would that be happening as well?

Y
Yogesh Malhotra
executive

So generally, what happens is that, I mean, whenever the prices of lead goes down, there is a higher profitability from the hedging gain. What happens is that when the prices are down, you will not -- the vendors will not generally want to sell that their material. So during that time, you will have to hedge that on the purchasing side. Whereas when the prices go up, you will have to hedge on the sales side. So that is why you will see profitability from the hedging gain more when the fluctuation is higher.

C
Chetan Thacker
analyst

Understood, sir. Understood. So INR 40 crores -- INR 38 crores pertains to 40,000 tonnes that we've seen in this quarter, and that is how we should look at it. So that is approximately INR 10,000 a tonne. That is the right way to look at it?

Y
Yogesh Malhotra
executive

So it is higher this side because of variation or fluctuation was higher. If it remains same, then we will see a very little gain or loss in the hedging quantity or hedging amount also. More to do with the volatility in the market than to anything else.

C
Chetan Thacker
analyst

Sure. And sustainably, we still maintain INR 19 to INR 20 a kg for lead in terms of...

S
Sunil Kansal
executive

INR 18 to INR 19 per kg in lead.

C
Chetan Thacker
analyst

Perfect. Sir, second question pertains to the fundraise. So we are doing INR 1,000 crores fundraise, given our CapEx, given our cash flow. Just wanted to understand where do we need this additional INR 1,000 crores.

Y
Yogesh Malhotra
executive

So as there are certain policy changes that are taking place, the recent one is this reverse charge mechanism that is going to come up. And also, we are looking at some opportunities in merger and acquisitions across globe. So we want ourselves to be ready as and when such an opportunity is there. So that is why we have taken a mandate, but we'll raise the fund as and when we have these opportunities in place.

C
Chetan Thacker
analyst

Got it. And sir, reverse charge would essentially in your assessment lead to what kind of opportunity opening up for refining?

Y
Yogesh Malhotra
executive

So what will happen is that, as we mentioned that this battery waste management rule of the extended producer responsibility help in converting the unorganized sector into organized sector. The reverse charge mechanism will also fast track this conversion from unorganized to organized because currently in the unorganized sector, a lot of GST vision is taking place. With this reverse charge mechanism, that will reduce. So that will fast track this conversion.

U
Unknown Executive

So I'll add on this, basically on reverse charge mechanism, when you buy material from unorganized or unregistered person from who doesn't have a GST number. the tax can be paid by the buyer. So this has been already introduced in Metal Scrap from Chapter #72 to 81. While on the other scrap, battery and all, it is expected soon. And apart from reverse charge, there is an additional TDS of GST, that is 2% has been introduced, again on metal scrap. So we expect the same in batteries to -- in time to come. So it's already there on aluminum scrap and other metal scrap, ferrous and nonferrous. So this will bring some transparency and tax compliances. So there will be a lot of material flow into formal sector from informal.

C
Chetan Thacker
analyst

So the advantage of GST which the unorganized had today, they will gradually start coming into the net. So even they would ideally either have to come on books very clearly, that in turn will increase their cost of doing business also. And certain companies would want to then shift to more organized players. That is how we should approach this?

Y
Yogesh Malhotra
executive

Absolutely. Absolutely.

C
Chetan Thacker
analyst

Saying that, [indiscernible] factors that will play out. So not only one person will gain, but even the organized guys will start to move into the formalized channel as well?

Y
Yogesh Malhotra
executive

Absolutely. So the entire formal sector will gain on this change. And Gravita being a leader in this recycling business and have pan-India presence. So -- we have -- we would set to gain a little bit more than other companies who have only a single set of operation in one location.

C
Chetan Thacker
analyst

Understood. And sir, 1 last question on particularly this quarter, when I look at the OP per tonne. So we've got an advantage of better domestic scrap availability and that in turn has led to this improvement because of mix. Because the understanding was that, ideally, if we get imported and sell in domestic, that is also more profitable. So just wanted to get a sense on that.

Y
Yogesh Malhotra
executive

Definitely, that is more profitable. And what has happened in this quarter is that we have diverted some of the material from our overseas locations into India to take advantage of this arbitrage opportunity. And that is why, if you see the volume growth is not as much -- I mean, it's not there because -- we have moved some of the materials back into India from our overseas and they have then -- so to take advantage of this arbitrage opportunity. And of course, domestic scrap is more or less for tooling business most of the time. So it does not impact the EBITDA margins that much.

C
Chetan Thacker
analyst

Understood. And the last bit on the sales from Africa to Europe that had got impacted. So fair to assume now that has got stabilized and we found alternate buyers there and those volumes are now back to normal?

Y
Yogesh Malhotra
executive

So one of the reasons that volumes are not growing, although our production has grown in the last quarter is because we are diverting some of these materials into India. Also because there is some advantage of the opportunities in India, so we have diverted some of the materials from East Africa into India. As in -- selling it into Europe now.

Operator

The next question is from Khush Nahar from Electrum Portfolio Managers.

K
Khush Nahar
analyst

So sir, my first question was what was the percentage of domestic scrap collection for our Indian plants for this quarter?

Y
Yogesh Malhotra
executive

In this quarter, the battery scrap procurement is around 37% and 63% is from the overseas scrap.

K
Khush Nahar
analyst

Okay, sir. And then my second question was on basically on the volume growth. So any particular headwind or any reason why we saw only a 8% volume growth this quarter, although our H2 will be better, but any particular logistic issue or demand issue that we're facing?

Y
Yogesh Malhotra
executive

Yes. So as I mentioned earlier also, if you look at the overall production over last quarter, it is around 7%. But as I mentioned that because we're moving some of the material from our overseas location into India to take advantage of the arbitrage opportunity, it's not showing in the consolidated sales number, because that gets eliminated once we sell it from our own plants into India. So it's not getting reflected. But if you look at the bottom line number, you can see that growth there.

K
Khush Nahar
analyst

Right. Okay. Sir, so just last question, if I can ask. Any update on the paper recycling plant set up in Central America?

Y
Yogesh Malhotra
executive

So I mean, paper recycling and steel recycling is going to take a little longer. You can expect it in FY '27, but not -- I mean, any movement in this happening in FY '27, not before that.

Operator

The next question is from the line of Bharat Shah from ASK Investment. Managers.

B
Bharat Shah
analyst

The one issue that you mentioned for fundraise, and you talked about reverse charge mechanism. I couldn't understand what is the correlation between the two?

Y
Yogesh Malhotra
executive

So what we are saying is that there could be a change over -- I mean, fast track conversion from the unorganized sector to the organized sector, so that may probably fast track our CapEx investments in this year and the coming year. So because of that, we may have to put up capacities much faster than we earlier thought. And therefore, we may have to raise some funds for that also.

B
Bharat Shah
analyst

Okay. So basically, the INR 1,000 crores potential fundraise is to deal with fast tracking of CapEx and to available acquisition opportunity?

Y
Yogesh Malhotra
executive

Yes, sir.

B
Bharat Shah
analyst

But this is an enabling provision or it is definite raising right away that you are...

Y
Yogesh Malhotra
executive

Not definite raising right away because we are looking at some of these mergers and acquisition opportunities. And as and when we have some clear picture about those opportunities also, then we will do that. Currently, we don't have -- I mean, it may take a couple of months before we decide on this.

B
Bharat Shah
analyst

So for the present, it is an enabling provision and it will be specifically linked to any definite acquisition or other opportunities that you concretize?

Y
Yogesh Malhotra
executive

Maybe, sir, it will take a couple of months to get that clear picture. If it happens before that, then -- I mean, it all depends on when we get a clear picture about some of the merger and acquisition opportunities that we are looking at. As and when that happens, we will then do this.

U
Unknown Executive

We are already evaluating a few of the opportunities. So whenever we see that things are more clear on that, definitely, we are going to take a action of this fundraise.

B
Bharat Shah
analyst

So then it is fair to say that the amount could be different than INR 1,000 crores. And second, whether it will happen or not happen itself could change depending upon on whether we get any targets or otherwise?

Y
Yogesh Malhotra
executive

Absolutely, sir. Absolutely.

B
Bharat Shah
analyst

So time variability, amount variability and the -- basically will be linked to the opportunity identification and otherwise, it may or may not happen? Or it may happen at a later date or a different amount?

Y
Yogesh Malhotra
executive

Yes, sir. You're absolutely right, sir.

B
Bharat Shah
analyst

And these, given the fact that hedging is integral to our business and given the fact that margins are modest, obviously, we can't -- and given the fact that supply chain issues are very important part of the business model, the hedging gains or any losses, I believe you should treat it as basically core integral income of the business, isn't it?

Y
Yogesh Malhotra
executive

Yes, sir, we do that. But this new financial standard, Ind AS. Yes. So Ind AS accounting doesn't allow us to consider it in EBITDA or operational income. So for the purpose on Ind AS accounting, it is as good as other income or other expense in case of loss. So in case of loss, it is already part of operational income because it is considered as other expenses. But in case of our income, it is considered as other income. So what we do is we -- when we present our presentation, so we consider it as operational income in case of other income. So we publish as EBITDA -- adjusted EBITDA considering that additional income from hedging as the operational income.

B
Bharat Shah
analyst

In the last part, the 4-year projections of the compounded growth, you said volume growth of 25%. And you didn't mention about the top line. So presumably, top line probably will grow at a similar pace or -- what is the underlying presumption on that to be made on a 4-year basis?

Y
Yogesh Malhotra
executive

So it will all -- I mean, so why we talk about volume growth is because the metal prices fluctuate a lot. So the top line growth will depend on the metal prices at any point in time, so which is not in our control. So that is why we do not mention the top line growth in our projections. We only talk about the volume growth of each and every vertical there. So as I mentioned that the lead would grow at around 17% to 20%, the other commodities of plastic and aluminum by FY '28 would grow at around 40% -- 40% to 45%. So the top line would depend on the prices of each of these commodities.

B
Bharat Shah
analyst

No, absolutely. That makes highest sense. So essentially, when we are talking about 25% volume and 35% EBITDA, we are basically saying that inherently we will manage those situations as well as we have done so far. And that increased growth of the business to reflect in improving margins bit by bit. That's how those 2 numbers are correlated, right?

Y
Yogesh Malhotra
executive

Absolutely, sir. Absolutely. So there are some advantages of economies of scale that is going to kick in as we grow bigger. And of course, because we have plans to increase the value-added content from current around 45% average to 50-plus percentage in future. And then there would be some operational efficiencies also along the way, which will contribute to some increase in overall margins.

B
Bharat Shah
analyst

And 1 last bit. Given the fact that our return on capital employed has held up and has continued to improve, sustain more closer to 28%, 29%. It would be fair to say that the interest cost and depreciation charge compounding would occur at a lower pace than what will occur on the EBITDA compounding?

Y
Yogesh Malhotra
executive

Yes, sir, to some extent, you're right. But as we are doing new CapEx, so the depreciation may not come down. But definitely, the interest cost will go down in the future.

B
Bharat Shah
analyst

No, I didn't mean absolute amount coming down. I said compounding of interest and depreciation charge would grow at a lesser pace than the growth that you're forecasting for volumes in the EBITDA. That was the statement I was making.

U
Unknown Executive

Yes, sir, you're 100% right because there will be proportion -- the finance cost and the depreciation will not rise in the -- in proportion to the rise in the EBITDA.

B
Bharat Shah
analyst

But you were saying that absolute amount itself may decline, is it over a period of time?

U
Unknown Executive

Absolute will not decline. Absolute will keep on increasing, even slightly the finance cost also, considering that we are not using the fundraise for the debt reduction at this moment. So considering the debt at the same level or slightly higher level, the absolute interest cost and the depreciation will go -- keep on increasing, but not in the same ratio as EBITDA will grow faster. EBITDA will grow faster slightly.

Y
Yogesh Malhotra
executive

As we grow, a lot of investment would be done in increasing the inventory cycle also. So therefore, the absolute number will not come down. But as a percentage, it will come down [indiscernible].

B
Bharat Shah
analyst

Yes, that's exactly what I meant. And therefore, all of this should translate into steadily improving capital efficiency, isn't it? Because if our margins are rising bit by bit, and scale is giving us an advantage of improvement on the overall efficiency, if working capital continues to remain managing the same way? And then obviously, our return on capital employed would rise over this journey.

Y
Yogesh Malhotra
executive

Definitely, what you're saying is right, sir. And also because we are going into new verticals of plastic, et cetera, and we expect these new commodities and new verticals to give us higher margin as compared to lead -- so that would also contribute to some extent, but we also see some pressure coming on the raw material sourcing also as we go forward. So -- but overall, yes, there would be some slight increase in increased EBITDA margins going forward as well.

Operator

[Operator Instructions] The next question from the line of Sumangal Nevatia from Kotak Securities.

S
Sumangal Nevatia
analyst

My first question is on the plastic volumes. Now if we consider -- if you look at last 4 years, our volumes quarterly has been in the range of 3,000 to 4,000 tonnes. So just want to understand what is the constraint here? Is it a capacity constraint? Or is it the raw material -- the scrap constraint? I just want to understand this better. And going forward, what is our outlook and guidance on this?

Y
Yogesh Malhotra
executive

Yes. So I mean we've been saying that plastic is a little tricky as compared to other businesses that we are doing because you will have to develop new products to meet the market demand. That is how the EPR works in plastics. And it is taking a little longer than we expected to develop new products that can cater to the requirement of our customers. But as and when we keep on stabilizing one product after another, we see a huge value addition in this business also.

And the growth is also going to come exponentially once we stabilize the products. So until that time, probably you will see a similar number. Maybe next quarter would also be in the similar line. But definitely, we see some improvements in the way business is being done in plastic. So going forward, definitely, there will be a huge growth as and when the products are stabilized.

S
Sumangal Nevatia
analyst

Understood, Yogesh, sir. Sir, 1 question on the RCM. So on the ground, has the transaction started to happen as per the new policy? Or it is still a few months away?

Y
Yogesh Malhotra
executive

So as Mr. Naveen has just mentioned that it has been announced on metal scrap. Unfortunately, battery scrap and plastic scrap has not come so far in this -- and we are expecting it any time. So hopefully, by this month or next month, we would get a reverse charge mechanism also implemented on battery scrap. So once that happens, then definitely, we will see some movement.

S
Sumangal Nevatia
analyst

Okay. Understood. And sir, with this -- sorry, did I cut you?

Y
Yogesh Malhotra
executive

No, no, no. Please.

S
Sumangal Nevatia
analyst

Okay. Just 1 last question. With this environment compensation now being introduced, one, are we seeing any change in behavior or more seriousness of the OEMs towards recycling? Any anything visible in your interaction, number one? And number two, with the EPR credit being now priced in the range of INR 5 to INR 18, do we see this as a new potential revenue stream for us in the future? Or it's more of an enabler of our recycling business?

Y
Yogesh Malhotra
executive

To answer your first question, definitely, there's a huge change in the attitude of producers or brand owners. And we see -- as you've seen the domestic scrap availability has increased, and that is 100% because of this EPR regulations coming into place. And this new -- I mean, although we are not seeing this new steam as a revenue stream for us, but definitely, this will help us procure more material, more domestic material in the future. So we -- although there may be some opportunities in this also, but currently, we are not considering this as a revenue or profit stream.

Only -- I mean, so we can -- we are able to pay higher prices for scrap in future to fight with the unorganized sector. So that's all.

S
Sumangal Nevatia
analyst

Okay. Okay. Understood. And is it possible to share what is the mix of tolling in the existing domestic business?

Y
Yogesh Malhotra
executive

So until the time this reverse charge mechanism is in place, majority of it is going to be tolling only. Once this reverse charge mechanism comes into play, at that point in time, we would probably go into the market to start procuring on our own. Right now, if you look at it, probably 80% of the material is coming from tolling only -- in domestic, sorry.

S
Sumangal Nevatia
analyst

Understood. And are we in touch or any new OEM empanelment are we looking at? Or any potential [indiscernible] there?

Y
Yogesh Malhotra
executive

Yes. We are on a regular basis, in touch with all these OEMs and hopefully, very soon, we'll start tying up with some of the major OEMs at least in battery.

S
Sumangal Nevatia
analyst

Okay. Okay. And just 1 last question for Sunil, sir. for our -- I mean, M&A opportunities which we keep exploring, what is our focus? Is it existing verticals? Or is it new verticals? Any thought process if you can share, sir?

S
Sunil Kansal
executive

So yes, we are open to any recycling business in any geography. But definitely, the first focus will be on our existing verticals, which is lead, aluminum, plastic and rubber. So because plastic and rubber, we're very small in this. So plastic and rubber definitely will be in focus. So -- but we're open to lead also. But lead, we are not seeing any opportunity in India, but yes, we are open for any -- but we are open to new verticals also. That's not also not restricted.

Y
Yogesh Malhotra
executive

So I would add here that looking at the RCM coming into play, we may look at some opportunity in India for lead also to speed up the capacity expansion.

Operator

The next question is from the line of Jenish Karia from Antique Stockbroking.

J
Jenish Karia
analyst

Sir, first is on the rubber recycling acquisition that we done. So what kind of revenue run rate we can expect next year onwards? And what kind of per kg margin we are expecting in the business?

Y
Yogesh Malhotra
executive

So this capacity of this is around 1,500 tonnes. So we are expecting to generate around 1,000 -- I mean, sort of 60% to 70% capacity utilization will be there right from the beginning. But that is only a very small project, and we are planning to increase the capacity there. We'll increase the capacities, we'll put up more CapEx to -- so it's a very small acquisition currently. But more strategic than anything else, where we want to set up our own businesses in Europe. So the moment we'll acquire this company, we will increase capacity in that company. And we'll also look at opportunities in other product categories as well, like plastic, battery and aluminum recycling in the same geography.

J
Jenish Karia
analyst

Sure. Sir, just from a rubber recycling point of view, since you are setting a plants in India also what kind of per kg or percentage margins do we factor in for this business....

S
Sunil Kansal
executive

Jenish, your voice is not clear. If you can repeat the question, please?

J
Jenish Karia
analyst

Yes. so I was just trying to understand what kind of per kg margins can rubber as a segment make because you're planning to do expansions within India also?

Y
Yogesh Malhotra
executive

So basically, we keep on mentioning that you cannot look at per kg or per -- percentage margin because it will vary from geography to geography. So the best way to look at it is how much ROCE it is going to generate. And we expect ROCE upwards of 35% in rubber in overseas locations and in India around 25%.

J
Jenish Karia
analyst

That's kind of helpful. Secondly, on the Sri Lanka entity buyback. So is it happening to provide an exit to the partner? Or will Gravita Netherlands also participate in the buyback?

S
Sunil Kansal
executive

So we have not yet decided on that. It is under consideration. But yes, so buyback is already announced, so we'll decide on that.

J
Jenish Karia
analyst

Okay, sir. And sir lastly, last quarter, we had mentioned around 2,500 tonnes of material was in transit. So is there any container availability issue in the current quarter also, firstly? And secondly, we do not see the impact of the 2,500 tonnes on the sequential volume. So sequentially, the volumes were up by around 1,000, 1,500 tonnes only. So can you help us understand the gap between the same?

Y
Yogesh Malhotra
executive

Yes. So basically, I mean, there is some issue -- logistics issue that is continuously going for the last 2 to 3 quarters, but that is not very material. As far as the transit material we are talking about, generally, it gets -- it does not get reflected in the consolidated statement. So as I mentioned that the growth that you see is -- I mean, you have to reduce the intercompany transactions in that. So therefore, although if you look at the bottom line, you can see growth happening there. But if you look at the top line, probably you will not see the growth. So that will not get reflected in the top line numbers.

Operator

The next question is from the line of Aditi Loharuka from CD Equisearch.

A
Aditi Loharuka
analyst

Sir, can you just give me a sense of your bargaining power with both buyers, like suppliers and customers?

Y
Yogesh Malhotra
executive

So it depends from geography to geography, wherever we are present, currently. If you look at the procurement network that we have, we go to the last mile to small scrap dealers, and that increases our bargaining power with them. If we go and buy from aggregators, definitely that bargaining power is not there. As far as suppliers are concerned, generally, in value-added products, wherever we are dealing, we have a better bargaining power because quite a few people do this. But if we talk about commodity products like refined lead or some normal products, then definitely the buying power lies with the supplier. So it's different for different things.

A
Aditi Loharuka
analyst

Okay. So while I was going through the presentation, I came across a partner network that you have. I came across companies like Exide, [indiscernible], Amara Raja, they are very large players. So with them, like do they come to you for like selling their scrap and not go to SME as the bargaining power is high?

Y
Yogesh Malhotra
executive

Their bargaining power is high, as I mentioned that -- but at the same time, they need vendors who can provide them regularly -- there have to be a trust from the vendors because their operations depend on material coming, the quality of the material, the quantities of the material, the consistency, et cetera. It all depends on the vendors they tie up with. And there are very few people who can do this.

At the same time, there is another benefit that Gravita has, and that is our global networks, both in India as well as overseas, we have many plants. So we can take advantage of logistic cost also. We can supply to the customer from various plants, various operational facilities, so all these help us in getting these big names as of our customers.

A
Aditi Loharuka
analyst

Okay. And sir, 1 more thing that we import most of our scrap. So why is it so like -- can't you procure it domestically?

Y
Yogesh Malhotra
executive

So see, basically, there are 2 reasons: one is that imported scrap is cheaper. As I mentioned that we have a network in some countries where we have our own scrapyards. So we import materials from those scrapyards. So it's cheaper to us compared to the domestic scrap prices, and that is one of the reasons. The other reason is that until now, most of the domestic scrap was going to the unorganized sector because in India, there is a GST of 18% on scrap. But now with this new battery-based management rules and extended producer responsibility, also the newly -- a new policy of reverse charge mechanism, we have started getting more and more scrap in the Indian domestic market also. So if you look at our last few years, the domestic content has increased, and it will continue to increase in future also.

A
Aditi Loharuka
analyst

Sir, but this is off late, right? But since like quite a few years, we have been importing. So...

Y
Yogesh Malhotra
executive

So the import is not growing as much as the domestic scrap is growing. So if you talk about 3, 4 years back, 90% of our total production in India is dependent on import of scrap. Currently, it's around 60%. And we have grown around 3x -- in the last 4 years, we have grown 3x. So you can see the amount of domestic scrap that we started getting in India now.

A
Aditi Loharuka
analyst

Okay. So it's nothing related to the availability of quantity?

Y
Yogesh Malhotra
executive

Sorry?

A
Aditi Loharuka
analyst

Availability of quantity of scrap in the domestic market.

Y
Yogesh Malhotra
executive

What is the total amount of scrap in the domestic market that we get? In our scrap market?

So in this year, out of the 46,000 tonnes that we have procured in net terms in India, around 14,000 tonnes have come from domestic market only.

Operator

[Operator Instructions] The next question is from the line of Aman Soni from Nnvest Analytics Advisory.

A
Aman Soni
analyst

My question is on the lithium-ion battery recycling. So just to understand a bit on regulations related to lithium-ion battery. I understand we are quite focused on it. But can you let me understand as per the latest regulations, by when do you expect a significant portion of these batteries to come into the circular economy for recycling? And what percentage of market share are we targeting with our pilot plant in this category, sir? So that is my first question, sir.

Y
Yogesh Malhotra
executive

So in lithium-ion battery, the regulation is same as in lead-acid battery. It comes under the battery waste management tool only. So there is no difference. And it is already in place. The only issue with the lithium-ion battery is that currently the lithium-ion battery that is coming into the market, the scrap that is coming into the market is coming from these mobile batteries and laptops, et cetera. But the major volume will come when the EVs will start generating these lithium-ion batteries. So year '28, '29, maybe from year 2030 also.

So we are just setting up this plant to understand the technology, to understand the ecosystem, tie up with these vehicle manufacturers who are into EVs. So that as and when the scrap starts coming, we shall be ready for that. That is number one. And number two, we are also looking at some opportunities where we can import these EV scraps in some countries like Europe and U.S.

So currently, we are not targeting the Indian market for this domestic battery scrap and computer scrap -- computer battery scrap that is coming into the market. We are eyeing the EV battery segment majorly.

A
Aman Soni
analyst

Understood, sir. And secondly, on the API regulations related to rPET recycling, that is the bottle-to-bottle recycling in India. Do you see any forthcoming regulations from Government of India in this regard. And are we looking to capitalize the same? Because as far as I understand, the segment is a margin-accretive one. And a few players in India are building up the capacity in this direction. So what's your comment on that, sir?

Y
Yogesh Malhotra
executive

So there is going to be huge demand as and when this start -- this will get implemented, this rPET -- I mean there is a 30% rPET resin requirement in new bottle manufacturing. So the overall market demand will be very high and that will ensure that the people who are doing recycling for yarn, et cetera, will get marginalized. And more and more scrap will come into the bottle-to-bottle grade because that is more profitable. And that is going to be more profitable because of this regulation.

And there is enough space available in this segment in addition to the 2 major players in this currently. So we see a lot of opportunities because unlike lead or aluminum where you can put a plant in 1 region and then cater to that region. In plastic, you'll have to put multiple plants in various locations within the region also. So setting up these many plants probably is not very easy for any one particular company. So there will be enough space for new entrants to come into this bottle-to-bottle grade manufacturing also.

A
Aman Soni
analyst

And what is our thinking in this direction, sir, like for next 2 to 3 years? Like what kind of CapEx are we putting in?

Y
Yogesh Malhotra
executive

So we are actively looking at an opportunity, but this PET recycling is not part of this Vision '28, where we said that we will do 25% growth in volume terms. We have not considered PET volumes in this Vision 2028. If anything comes, that will be in addition to this 25% growth rate, but we are definitely looking into food grade or bottle-to-bottle opportunity that is coming up in India.

A
Aman Soni
analyst

And lastly, sir, what is the guidance for remaining of the year? Like margins impacted in this quarter. So what is the guidance for rest of the year in terms of margins and top line growth?

Y
Yogesh Malhotra
executive

It's in line with our projections for the next 4 years. So there can be a slight -- because this is never going to -- we have always maintained that this growth is never going to be linear. So there will be a period where you will see higher growth, some period will see lower growth also. So it will -- but it will remain in the same line, same range of around 22%, 23% to 27%, 28%. So this year could be 23% also, could be 27% also. But in the longer run, if you look at it, if you look at FY '28, then definitely 25% -- upward of 25% volume growth is expected.

Operator

The next question is from the line of Amit Lahoti from Emkay Global Financial Services.

A
Amit Lahoti
analyst

So given that you are maintaining EBITDA per kg guidance of INR 18 to INR 19 per kg. And with the first 2 quarters, higher than this range, especially the Q2, are we expecting these levels to kind of decline and normalize in H2? Or we can beat this guidance?

Y
Yogesh Malhotra
executive

No. Actually, as I mentioned that the sustainable number for lead is around INR 18 to INR 19 per kg. Sometimes you get arbitrage opportunities as we got in Q2, and therefore, the numbers are a little on the higher side. Although in the longer run, if you talk about it, there would be some improvements. We can take it to around INR 19 to INR 20 in the next 2 years. But if you look at the near future or next quarter or the quarter after that, the sustainable number would be INR 18 to INR 19 only.

A
Amit Lahoti
analyst

Okay. Sir, for this year, could it be on the higher side of, say, INR 19 per kg? Or you still want to guide for a midpoint?

Y
Yogesh Malhotra
executive

Sorry, I couldn't hear your question.

A
Amit Lahoti
analyst

Yes. So I'm asking for this year FY '25, could it be on the higher end of the range of INR 19?

Y
Yogesh Malhotra
executive

Yes, it could be a little higher. There is an opportunity we have done in Q2. So if this opportunity remains there, then definitely will probably get a little higher than INR 18 to INR 19. There's a possibility, yes.

Operator

The next question is from the line of Bhavya Gandhi from Dalal & Broacha Stock Broking.

B
Bhavya Gandhi
analyst

Couple of questions from my end. Sir, one, if you can mention what will be targeted EBITDA and ROCE for the plastic business? You said it's on the higher range. But on the ROCE front, if we were to compare with the existing business, is it higher? EBITDA, I understand it's higher. But then the CapEx requirement is also higher, right?

Y
Yogesh Malhotra
executive

[indiscernible] percentage-wise is higher. Although on absolute number, it is around INR 10 crores to INR 11. But if you look at the percentage-wise, it's around INR 12 to INR 14 -- 14%, which is higher than less. And ROCE is also higher, but currently, we are not running it at full capacity. So capacity utilization is not there. So therefore, you may see a similar ROCE of around 25% in Indian operations. But going forward, as we improve the utilization and as we develop the product, the ROCE is going to be much higher than the lead or aluminum.

B
Bhavya Gandhi
analyst

So you're seeing higher ROCE is there in plastic recycling, rPET food grade than the lead and the existing businesses like aluminum and all those?

Y
Yogesh Malhotra
executive

So we are not currently in India in rPET. So we can't comment on that. But yes, from our experiences in bottle-to-bottle flakes overseas, we see higher margins and higher EBITDA numbers in rPET.

B
Bhavya Gandhi
analyst

I understand margins. On the ROCE front, I'm asking?

Y
Yogesh Malhotra
executive

The ROCE also is higher.

B
Bhavya Gandhi
analyst

ROCE is also higher. Okay, got it. And unlike your lead, you can not hedge plastic...

Y
Yogesh Malhotra
executive

We are not talking about the Indian operations so far. We'll have to really look into it because CapEx has also changed over the years and Indian market is a little different than overseas market. So we can't comment on the Indian market as far as bottle-to-bottle rPET is concerned.

B
Bhavya Gandhi
analyst

Right. Got it. And also, unlike your lead, plastic has a different grade, right? You mentioned that you're developing different products. So how do you hedge -- what would be the hedging mechanism when it comes to plastic? Or will it be like an open market sale and we'll have to bear the risk of the commodity?

Y
Yogesh Malhotra
executive

Generally, what happens is that in plastic is basically dealing directly with the OEMs, where you will be developing products based on their requirements. And then you can link that product price with these companies based on the prevalent prices, which currently are Reliance prices for those grades of plastics. That is what we are developing. So there is a natural hedge here in plastic as we see it.

B
Bhavya Gandhi
analyst

No, if you can help me understand how is it a natural hedge, sir?

Y
Yogesh Malhotra
executive

So what happens is that you buy plastic in India based on the prices of Reliance. And then if you can sell these at the same prices -- index prices to the end customers, then there is a natural hedging wherein which you don't have to go to the exchange and get it hedged.

B
Bhavya Gandhi
analyst

Okay. You are trying to say you would be more of a facilitator. You will just have some cost plus margin mechanism in place or absolute margin in place -- that is what you are trying to say?

Y
Yogesh Malhotra
executive

It's a combination. We'll take a delta. But what happens is that when you buy scrap in India, generally, the scrap is priced at a percentage of the Reliance's price of that particular grade. So what we do is that when we sell it into the market, we just talk to the customer that we'll sell you at a price of the same grade of plastic Reliance that, and there is a formulation based on that. So there is no -- here also, the inventory level are also not going to be high because you're not importing the inventories you're using the domestic plastic inventory. So -- I mean, so the overall cycle is not that big. So the requirement of plastic hedging is not that prevalent currently.

B
Bhavya Gandhi
analyst

Right. Just one last thing. I wanted some comfort on the corporate governance side, although we have Walker Chandiok auditor in place, but the partner who is signing the documents also belongs to the similar community as that of promoters. So if you can throw some light on that, if they're related or what sort of relation -- community relation do they have? Or -- or are they clearly independent of that?

Y
Yogesh Malhotra
executive

Can you come again, sir. We couldn't hear your question properly.

B
Bhavya Gandhi
analyst

I just wanted some comfort on the corporate governance. The auditor who is signing the documents -- signing from the Walker Chandiok belongs to the same community that of our promoters. So if you can give me some comfort on that?

Y
Yogesh Malhotra
executive

How many chartered accountants in this community -- I mean, you look at it, then you'll realize. There is -- GT -- the company's GT, and there is no relation whatsoever with the owner or the promoter of the company.

Operator

[Operator Instructions] The next question is from the line of Bhavin Pande from Athena Investments.

B
Bhavin Pande
analyst

So we could see that volumes have grown by 8% and realization seem to have gone higher. And you have EBITDA per tonne, specifically in the lead business has been increasing sequentially on a Y-o-Y basis. And EBITDA and PAT growth has been robust. So what is triggering this operating leverage? And secondly, again, I think you expanded on why..

Y
Yogesh Malhotra
executive

I'm sorry, the voice is not very clear. Can you come up again?

B
Bhavin Pande
analyst

Okay. Am I clear now?

Y
Yogesh Malhotra
executive

Yes, you're clear.

B
Bhavin Pande
analyst

Yes. So I just wanted to -- so the revenue growth, the 3% gap between volume and revenue, it was on account of realization improvement. And secondly, what is changing the operating leverage because our EBITDA and PAT growth is extremely high as compared to revenue growth? And secondly, I think you touched a bit on moving -- a transition from foreign markets to the domestic market. So what was that, that I missed it in the initial commentary?

Y
Yogesh Malhotra
executive

So what happens is that Indian market follows a different price and overseas or global markets follow a different price. So whenever there is an arbitrage between Indian prices and overseas prices, we moved some of the products from overseas plants into India. And also, when we import material from third parties also into India, rather than exporting it, we sell that material into India. So if you look at it, 70% generally, we -- of the Indian production, 40% is sold outside and 60% is sold in India. If you look at current year, we have sold 70% of the total production into India, which means that we've taken advantage of the arbitrage opportunity that lies between prices -- global prices and Indian prices. And that is what has helped us increase the EBITDA margin, but this is not a sustainable additional margin. The sustainable margin is around INR 18 to INR 19 only.

B
Bhavin Pande
analyst

Okay. And sir, what explains the operating leverage -- apart because I assume it cannot be all realization, right?

Y
Yogesh Malhotra
executive

I didn't get it.

B
Bhavin Pande
analyst

Sir, EBITDA growth and PAT growth -- on a Y-o-Y basis, so what explains the operating leverage in that?

Y
Yogesh Malhotra
executive

The operating leverage?

B
Bhavin Pande
analyst

Sir, EBITDA growth on a Y-o-Y basis.

Y
Yogesh Malhotra
executive

It's around 27%.

B
Bhavin Pande
analyst

Correct. And while revenue growth is 11%. So what explains the operating leverage bit here? That's what I wanted to understand.

Y
Yogesh Malhotra
executive

As I mentioned that when you move some of your products into India, then it does not get reflected in a double sales. So it will not get reflected in revenue numbers, but because it is the same company, but it will reflect on the profit margins. So that is why there is a difference between the top of the revenue growth and the EBITDA growth or the profitability growth. Some of the material from our overseas companies, we have used it in India. So it gets canceled out in the consolidation.

Operator

The next question is from the line of Parth Shah from Tara Capital Partners.

P
Parth Shah
analyst

On the revenue volume growth part, I know you've explained it twice. But if you could just once more explain why the revenue -- the volume growth is lower on account of the raw materials being transferred from the overseas market -- from the overseas presence to the domestic markets?

S
Sunil Kansal
executive

So let me explain once again. Okay. So what we do is, normally, we have a customers also in the international -- for the international business, whatever we manufacture internationally in overseas plants, we usually sell to international customers directly from those plants. But whenever the Indian prices because the Indian prices is a different index, which is Indian index, and it does not follow same price arbitrage like -- international market goes with the LME, but the Indian market grows differently. So sometimes during the year, when the Indian prices are higher than the international market, so we don't -- we discourage the selling of direct selling from those overseas plants to directly to the customers. We import that good in the Indian market, and we slightly do some value addition in Indian plants and sell it in India to get better price.

So those signs that volumes get cancelled, whatever we sell from overseas plants to Indian plants, that volume is not considered as sales volume. And -- but we get slightly better margins at that point of time. And -- but we have to compromise on the volume side, but we are better on the margin side. So that's the reason which happened in this quarter, we are better on the margins, but we compromise on the volumes.

P
Parth Shah
analyst

Okay. Got it. And the next question is the peers have actually reported better -- significantly better volume numbers. So are we seeing any market share loss over here?

Y
Yogesh Malhotra
executive

So generally, what we mentioned that there is a new regulation of battery waste management rule, which is converting the scrap that was going into the unorganized sector to the organized sector. A lot of consolidation is happening, and the share of organized sector is increasing vis-a-vis the unorganized sector, and that is what is changing, what is increasing the overall scrap availability to us in India. Okay. Okay. Is that clear?

Operator

Ladies and gentlemen, that was the last question for today. We have reached the end of our Q&A session. I would now like to hand the conference over to the management for closing remarks.

Y
Yogesh Malhotra
executive

Thank you, everyone, for participating in this call. We trust that we have addressed all your queries during this session. However, if there are any remaining questions, please feel free to reach to our Investor Relations team at Go India Advisors. Once again, we extend our gratitude to all the participants for joining us today. Thank you, and have a great day.

Operator

Thank you. On behalf of Antique Stockbroking, that concludes this conference. Thanks for joining us. You may now disconnect your lines.

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