GRAVITANSEQ4 FY2022May 20, 2022

Gravita India Limited

8,258words
151turns
11analyst exchanges
3executives
Management on call
Sabri Hazarika
EMKAY GLOBAL FINANCIAL SERVICES
Yogesh Malhotra
CHIEF EXECUTIVE
Sunil Kansal
CHIEF FINANCIAL OFFICER
Key numbers — 40 extracted
666 Crore
ion volumes and higher realization across business segments. Our revenue from operations stood at 666 Crores registering a growth of 52% from Rs.438 Crores in Q4 last year. Domestic business continues to l
52%
across business segments. Our revenue from operations stood at 666 Crores registering a growth of 52% from Rs.438 Crores in Q4 last year. Domestic business continues to lead revenue growth with 64% s
Rs.438 Crore
siness segments. Our revenue from operations stood at 666 Crores registering a growth of 52% from Rs.438 Crores in Q4 last year. Domestic business continues to lead revenue growth with 64% share while oversea
64%
f 52% from Rs.438 Crores in Q4 last year. Domestic business continues to lead revenue growth with 64% share while overseas business contributed 36%. Business segments have delivered strong growth o
36%
stic business continues to lead revenue growth with 64% share while overseas business contributed 36%. Business segments have delivered strong growth on a year-on-year basis, net revenues were up by
47%
. Business segments have delivered strong growth on a year-on-year basis, net revenues were up by 47% and aluminium revenues were up 104% and plastic revenue were up by 49%. In terms of volume price
104%
rong growth on a year-on-year basis, net revenues were up by 47% and aluminium revenues were up 104% and plastic revenue were up by 49%. In terms of volume price mix the ongoing geopolitical tension
49%
s, net revenues were up by 47% and aluminium revenues were up 104% and plastic revenue were up by 49%. In terms of volume price mix the ongoing geopolitical tensions have resulted in broad base incre
23%
ity prices, which has a favorable effect for revenue growth. For the quarter, volume growth was 23% on a year-on-year basis and total tonnage was 37000 metric tons, EBITDA per ton also improving in
Rs.73 Crore
EBITDA per ton also improving in all three segments. Company has delivered an adjusted EBITDA of Rs.73 Crores, a growth of 102% on a year-on-year basis from Rs.36 Crores in same quarter last year. EBITDA ma
102%
ving in all three segments. Company has delivered an adjusted EBITDA of Rs.73 Crores, a growth of 102% on a year-on-year basis from Rs.36 Crores in same quarter last year. EBITDA margins have increase
Rs.36 Crore
has delivered an adjusted EBITDA of Rs.73 Crores, a growth of 102% on a year-on-year basis from Rs.36 Crores in same quarter last year. EBITDA margins have increased by 273 basis points to 11% compared to
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Guidance — 20 items
Sabri Hazarika
opening
“So, today's session will be a brief on the results by the management and then we will be moving over to the question and answer around.”
Yogesh Malhotra
opening
“ROC stood at 29% as compared to 18% in financial year 2021, this is in line with our target and with a result of a well defined growth strategy supported by improving industry dynamics with working capital and improving product portfolio.”
Yogesh Malhotra
opening
“We will be utilizing our learning from this plant to establish similar rubber recycling facilities at our other manufacturing locations as well.”
Yogesh Malhotra
opening
“We also faced certain challenges, power and fuel costs has seen unprecedented increase also with some global disruptions in logistics, so the finished goods and target inventory has piled up, also due to slow down the economy in Sri Lanka, there are having certain operational issues due to which the volumes have been slightly lower.”
Yogesh Malhotra
opening
“We expect the Sri Lanka volumes to continue to operate at lower volumes in the next quarter as well; however, they will not have major impact on the group as we are fairly geographically diversified and our capacity growth and technology some improvements keeps us in a better position to manage any disruptions arising at any specific location.”
Yogesh Malhotra
qa
“Yes, so proportionately this will be number that is changing according to the size of the business from that segment, so other numbers will not be in the same line so like we are forcing the other telecom companies also, so there is no credit on that site.”
Rahul Bhangadia
qa
“Okay, but you still standby your target of reducing the working capital to 60 days?”
Piyush Mehta
qa
“Sir, just a couple of questions on I think the finance coast which you have mentioned is actually just to maintain interest cost, is this one off or will be keep seeing it as long as, can you explain the nature of this incremental almost close to 8 Crores cost that plus the forex cost, which we have taken for expensive in groups, the nature of these two cost that have come in?”
Yogesh Malhotra
qa
“Yes, and the forex cost of six months is bought on the lower price, we have already take that goods for that goods so this will be whenever this goods is export against our export order we already have so that gain will come.”
Piyush Mehta
qa
“In the forex cost if you see in your expenses item that you will be reclassified profit and loss you have shown foreign currency translation reserve?”
Risks & concerns — 1 flagged
In the fourth quarter of the fiscal year, Gravita continues to maintain the growth momentum as the overall economy saw reduced impact of as others and improving business environment and broad base increase in consumption.
— Yogesh Malhotra
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Q&A — 11 exchanges
Q
Thank you for taking my question, Sir. Congratulations on a good set of numbers. I have two, three questions, first one on the balance sheet, I can see that the creditors has dropped off quite a bit in the last six months, September took about 230 Crores it was number and now it is down to about 90 Crores odd, this is contradict to the general expectation that as you increase your local sourcing your creditors should be actually in a position to fund your inventory correspondingly because the creditors have gone down that has gone up, so if you could just explain what has happened here?
Yogesh Malhotra
Sure, Rahul. So, basically in recycling business practically saying there is no creditors are such because whenever we buy the scrap we need to pay upfront, but as an exception as we are sourcing the scrap from various OEMs like Amara Raja, so they gives us the scrap and we just need to give them the finished goods in turn convert into the metal and supply that to them, so this model we adopted and initially when we started this model so there were some time gap their inventory was lying with us for two to three months, so which has now reduced because they want the inventory back in one and o
Q
Congratulations for good set of numbers. My first question is that the plastic division has seen a substantial increase in margins, so if you could just throw some light on what has led to that increase and is it sustainable or not?
Yogesh Malhotra
So, actually plastic business has just started to stabilize for the past one to two years because of the COVID as we have already mentioned sometimes back in our presentation, but because of the COVID, there was overall decrease in the businesses especially our PET, which is dependent on overseas in Central America business, but now that has started stabilizing and we see huge growth in terms of the value we can see in that region, also because there are certain policy changes that have taken place in the markets we supply to like the US and the Europe they have made recycled footwear plastic
Q
Good afternoon, Mr. Yogesh. Sir, just a couple of questions on I think the finance coast which you have mentioned is actually just to maintain interest cost, is this one off or will be keep seeing it as long as, can you explain the nature of this incremental almost close to 8 Crores cost that plus the forex cost, which we have taken for expensive in groups, the nature of these two cost that have come in?
Yogesh Malhotra
So, the one reason of increase in the finance cost is the increase in debt one part is that, but the major part in this quarter is on an account of like we do take some foreign currency borrowing in the form of PCST and buyers credit and all, so this borrowing there is some one time loss we have, which will be as against inventory so whatever that inventory will be sold off, so we will be getting some operations on that account, but this is one time booked on an interim basis in the finance cost for this quarter, but the corresponding part of this gain will be reflected in the operational inco
Q
Mr. Kansal good evening. I like to cash from operations and poor HCF have impact reduced in the head of robust revenue growth during the year, which is somewhat under whelming, could you share some advantage to the managements guidance for OCF and HCF for FY2023 and FY2026, thank you?
Sunil Kansal
So, this negative free cash flow is because of as we mentioned that there was some inventory pileup because of some logistic disruptions, so going forward as we are reducing the working capital cycle so there will be free cash flow positive generation even considering the capex for 70 Crores to 80 Crores every year, so we will be generating some free cash flow from FY2023 onwards. Secondly, as per your investor materials, which points out most of your sales are in India, the most of your profit instead come from your overseas operations, this is also evident from the difference between consoli
Q
This is looking like a very interesting space with the entire effect coming into so much focus, so we will also go more multi location or multi country or our strategy would be to more spread out in India itself and what would our breakdown between the metal, plastic and paper, etc., in our entire revenue?
Yogesh Malhotra
So, the current businesses that we are in we believe that we will grow both in India as well as overseas, we see a huge opportunities both in India because of the change in the foresee mechanism of the government, they already talks about EPRs and we have management rules coming into picture, so we see a huge growth in India itself because we believe now that the recycling would start happening in organized sector, which was earlier happening only in the unorganized sector, so there also there is a huge opportunity, but overseas also we are very because most of our operations are in Africa and
Q
Thank you and congratulations gentlemen on a strong show. A couple of questions, one on the 25% volume CAGR that have been seeing for the next three to four years could you give a sense of the rising contribution from the plastics and rubber at least for the next one to two years?
Yogesh Malhotra
Yes, so as we earlier discuss all that we want to decrease the dependency on the led business, although led is also growing so we are trying to increase the higher growth in case of plastic and the aluminium parts and even from the newer device like rubber and we are also coming up with a copper recycling, so the contribution from the plastic and the aluminium is currently approximately 16% to 17%, which will be going to approximately 25% or more in the next two to three years. How could the margin profile shape up as our facility is mature and become more efficient not just in processing, but
Q
Thanks for the opportunity. I have two questions, one you mentioned on the commodity price in led and plastic is indifferent to the commodity prices, however your EBITDA per ton as compared to last year has actually grown just 12500 in Q4 last year and 13500 to now 19000 now, so if you could explain this vary will be helpful, please?
Yogesh Malhotra
See, as we mentioned that in plastic basically till last year the overall business was facing us up because of COVID and the collection was also lower and the demand in the market was loser, but now after COVID I think the market has stabilized a lot and we see great demand for recycle products in US and Europe, so because of the that the overall margins have increased not only that because now the volume has also grown up, so we are taking that advantage of economies of scale in plastic also, similarly led as we mentioned that our overseas business has grown up, we have also increased the cap
Q
Sir, you have mentioned about few diversification in rubber, copper and else and I am assuming these business models are different from your basic led, aluminium, plastic that you are get doing, how do you plan to kind of in the bandwidth needed will be different, the models would be different, how do you plant to degrade all that?
Yogesh Malhotra
So, some of the verticals are at content of our current operation like for example, rubber is very similar to what we are doing in aluminium and plastics, similarly copper is also very similar, in terms of lithium of course it is a little different and paper also is little different, but we can hire people, it is an overall market dimension remain the same, we also collect scrap from the scrap holders and give it to the OEMs, so sourcing which is a very important part remains core of the total value that we have taken so the core volume of each and every verticals that we are going into so thi
Q
Good afternoon and thank you very much for a good set of numbers. Sir, looking to your all expansion plants, etc., is it fair to assume that in the next three years our turnover will be more than doubled and consequently the topic also?
Yogesh Malhotra
In the last three years we have already doubled the number that we have already demonstrated, so it can be again repeated, so whatever capacity increase we have already setup and whatever capacity increase we are in the process of setup itself will take this forward to do around 3000 to 3500 Crores somewhere in the revenue and we see the profit will grow at a faster rate than the revenue numbers. Thank you very much.
Q
Just one understanding on the value added products, from the present level what do we see that scaling up to by the end of this year and next year and could you give us a sense of what is our rising name of these value added products that are in the market this year and next?
Yogesh Malhotra
So, basically we would take it to around 45% in this current year, 45% to 46% in the current year and eventually taking up to around 50% in another two to three years time, so in terms of what exactly led sheets, led brakes specialized plastic Reynolds for food grades certain customized alloys these all give us higher margin that the main products life plastic sales we find that, so whenever we get additional margin of around more than 2.5% to 3% over and over the cost control in making those products we consider it as value added products. I will just rephrase it which are the value added pro
Q
Thank you for participating in the earnings conference call. We have tried to address all your questions, if you have any further inquiries, please connect with our invertors relations team and we will be happy to address the same. Thank you.
Management
Speaking time
Yogesh Malhotra
62
Rahul Bhangadia
17
Piyush Mehta
15
Moderator
13
Pranay Jain
12
Navneet Bhaiya
11
Raj Shah
5
Faisal Hawa
5
Nitin A
4
Sunil Kansal
4
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Opening remarks
Sabri Hazarika
Thanks. Good afternoon, ladies and gentlemen. I welcome on behalf of Emkay Global. I welcome everyone to this Q4 FY2022 post-earnings conference call of Gravita India Limited. So, we have us the top management of Gravita, Mr. Yogesh Malhotra, CEO and Whole Time Director, Mr. Sunil Kansal, CFO. So, today's session will be a brief on the results by the management and then we will be moving over to the question and answer around. So, without any further delay, now I request Mr. Malhotra for his opening remarks. Over to you, Sir!
Yogesh Malhotra
Thank you, Sabri. Good afternoon, everyone. Thank you for joining our earnings call for Q4 and financial year 2022 results. We have already circulated our earnings presentation and I hope you had an opportunity to go through the presentation and we would be happy to take any questions afterwards. We would begin this call with a brief discussion on performance and financial results for quarter and year. In the fourth quarter of the fiscal year, Gravita continues to maintain the growth momentum as the overall economy saw reduced impact of as others and improving business environment and broad base increase in consumption. I am pleased to report that we have delivered strong financial performance supported by healthy growth in production volumes and higher realization across business segments. Our revenue from operations stood at 666 Crores registering a growth of 52% from Rs.438 Crores in Q4 last year. Domestic business continues to lead revenue growth with 64% share while overseas busin
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