Gravita India surges 15%, hits record high on positive business outlook

Shares of Gravita India hit a record high of Rs 925, surging 15 per cent on the BSE in Wednesday's intraday trade on the back of heavy volumes, on positive business outlook. Thus far in the financial year 2023-24 (FY24), the stock has zoomed 91 per cent.

The stock of the industrial minerals company has surpassed its previous high of Rs 860.40 touched on September 18, 2023. At 02:14 PM, it was up 11 per cent at Rs 892.65 as compared to 0.16 per cent rise in the S&P BSE Sensex. Average trading volumes on the counter more-than-doubled today with a combined 2.2 million equity shares, representing 3.2 per cent of total equity of Gravita India, having changed hands on the NSE and BSE.

Gravita India is in the business of recycling lead acid batteries, lead scrap, aluminium scrap, plastic scrap and rubber scrap. The company carries out smelting of lead battery scrap/ lead concentrate to produce secondary lead metal, which is further transformed into pure lead, specific lead alloy, lead oxides (lead sub oxide, red lead and litharge) and value-added products like lead sheets, lead powder, lead shot etc.

The company has diversified presence across India (five plants located in Jaipur, Chittoor, Gandhidham, Kathua and Mundra), and seven plants overseas in Africa (Ghana, Mozambique, Senegal, Tanzania and Togo), Central America (Nicaragua) and Asia (Sri Lanka). It has recycling capacity of 284,059 MTPA with 5 business verticals.

The management has set an ambitious growth plan called 'Vision 2027', aimed at achieving a compound annual growth rate (CAGR) of at least 25 per cent. The company's strategy is focused on value-added products and non-lead business as the company aims to broaden its business scope. In order to do this, the company plans to invest more than Rs 600 crore in capex to increase manufacturing capacity to 425,000 MTPA by FY 2026.

The Indian waste management market is witnessing a healthy growth rate, owing to the high population density and increased industrial activity, which is generating high amounts of wastes, both hazardous and non-hazardous.

"Circular economy concept is relatively new to India. However, the concept is gaining prominence. The Indian waste management industry offers huge potential, as only 30 per cent of the 75 per cent recyclable waste is being recycled currently. Proper policies for collection, disposal, and recycling and slowly growing efficient infrastructure creation are few of the many reasons putting the country in a brighter spot of the global recycling industry," Gravita India said in its FY23 annual report.

Meanwhile, rating agency Icra expects the company's credit profile to improve in the near-term, supported by higher share of value-added products and healthy volumetric growth, which would enhance the operating profits, and cash flows, thereby further supporting the credit metrics.

While assigning the ratings, Icra also took cognisance of the ongoing capacity expansion plans at an estimated outlay of around Rs. 250 crore over the next three years, which will increase the company’s total capacity by ~2,15,700 tpa.

"Given that the operating cash flows would largely be deployed to fund a substantial portion of the capex, the long-term debt requirement is expected to be low. Consequently, the company’s capital structure and debt coverage indicators are expected to remain comfortable. Post the expansion, the company will benefit from the increased scale and other operational synergies, which would further strengthen its overall operating profile," Icra said.