GRAVITA INDIA LTD (NSE: GRAVITA) Q3 2025 Earnings Call dated Jan. 23, 2025
Corporate Participants:
Yogesh Malhotra — Whole Time Director and Chief Executive Officer
Sunil Kansal — Whole Time Director and Chief Financial Officer
Naveen Prakash Sharma — Executive Director
Analysts:
Jenish Karia — Analyst
Amit Lahoti — Analyst
Amit Dixit — Analyst
Bhavin Pande — Analyst
Shweta Dikshit — Analyst
Sani Vishe — Analyst
Khush Nahar — Analyst
Anurag Mantry — Analyst
Siddharth Mehrotra — Analyst
Bharat Shah — Analyst
Parikshit Kabra — Analyst
Sumant kumar — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Gravita India Limited Q3 Q FY ’25 Conference Call hosted by Antique Stock Broking Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Jinesh from Antique Stock Broking Limited. Thank you, and over to you, sir.
Jenish Karia — Analyst
Yes. Thank you,. Good afternoon, everyone, and thank you everyone for joining the 3Q FY ’25 post-results conference call of Clavita India. I would like to thank the management for giving antique stock Broking the opportunity to host this call. From the management, we have Mr Yogesh, Director and CEO; Mr Suni Kansal, Director, CFO; and Mr Naveen Sharma, the Executive Director of the company. Without further ado, I now hand over the call to the management for your opening remarks, post which we shall open the call for Q&A. Thank you and over to you. Over to you, sir.
Yogesh Malhotra — Whole Time Director and Chief Executive Officer
Thank you. Thank you, Mr Jinesh. Good afternoon, ladies and gentlemen, and welcome to our Q3 and nine months FY ’25 earnings call. I trust you have had the chance to go through the earnings presentation and financial results that were uploaded on the stock exchanges. I am delighted to share that Gravita has achieved outstanding financial and operational performance in Q3 and nine months FY ’25. Before we dive into the results, I would like to discuss about some key strategic highlights and project updates. Recyclers Ghana Limited, a stepped down subsidiary of located in Ghana, West Africa has commenced commercial production of recycled aluminium alloys at its new recycling facility with an annual capacity of approximately 4,000 metric ton per annum in Phase-1. The company plans to expand this capacity to 8,000 metric ton per annum in near-future. Netherlands BV has increased its stake from 52% to 100% in Lanka Limited, our Sat down subsidiary. Gravita has successfully raised INR1,000 crores through QIP, which will be strategically utilized to support the company’s growth initiatives, including capacity expansion and diversification into new verticals. This investment aligns with the company’s vision of becoming a global leader in the recycling industry, while delivering sustainable value to stakeholders. Out-of-the funds raised INR2,45 crores has been utilized for various purposes, including repayment of borrowings and working capital. We are making steady progress on establishing a pilot project for lithium-ion recycling and our first rubber recycling plant in Mundra, India. Both projects are on-track and are expected to become operational in H1 FY ’26. Gravita is strategically processing — sorry, progressing towards its ESG goals of FY ’27, FY ’24 and FY 50. As outlined in its roadmap, by integrating ESG principles, the company aims to lead-in sustainable practices, drive innovation and uphold strong governance for long-term value-creation and community benefit. Coming to the operational performance, on the capacity expansion front, Gravita is steadily advancing towards its goal of exceeding 5 lakh metric ton per annum capacity by FY ’27. Currently, the company has a capacity of over 3 lakh metric ton per annum. In addition to this capacity expansion, the company is also exploring for strategic M&A opportunities to fuel its growth plan. Despite of the global economic slowdown, which has seen large impact on the metal sector on the volume front, we saw an overall growth of 33% in Q3 FY ’25. Volume for lead plastic aluminium showed an increase on both Q-on-Q and Y-on-Y basis. On year-on-year basis, the volume for lead, plastic and aluminum increased by 27%, 33% and 92% to 43,900 tonnes, 3,279 tons and 6,264 tons respectively. Strict government regulations under BWMR and EPR have led to an increase in domestic scrap availability, resulting in higher domestic scrap sourcing. In Q3 FY ’25, we experienced 50% growth in the domestic availability of scrap on a year-on-year basis. Moving to the financial results for Nine-Month FY ’25, consolidated revenue increased by 23% to INR2,832 crores. Consolidated adjusted EBITDA increased to INR295 crore, up 18%. EBITDA margin stood strong at 10.4%. Consolidated PAT showed significant increase of 28% to INR217 crores. PAT margin increased to 7.7%. 46% of the revenue came from value-added products, which is in-line with our vision 2028 of achieving 50% revenues from this category. Coming to financial results for the quarter, consolidated revenue for Q3 FY ’25 increased by 31% year-on-year and 7% Q-on-Q to INR996 crores. Consolidated adjusted EBITDA increased to INR102 crores, up 14% on year-on-year basis. EBITDA margins stood strong at 10.3%. Consolidated PAT showed significant increase to 29% year-on-year to INR78 crores, PAT margin stood strong at 7.8%. In conclusion, Gravita is progressing strongly towards its vision 2028 with a strategic focus on expanding existing verticals and entering new recycling verticals. Key targets include a volume CAGR of 25% plus, profitability growth of 35% plus and ROIC over 25%, along with increasing the non-led business share to 30% plus using 30% plus renewable energy and reducing energy consumption by 10% with more than 30 years of experience, 12 eco-friendly facility worldwide and presence in over 70 countries, Gravita is well-positioned for growth. The company’s ambitious capex and capacity expansion plans, adherence to stringent government regulations, global operations and integrated supply-chain provide a strong foundation. This growth is further supported by a commitment to operational excellence, our focus on high-margin value-added products, proactive risk management through hedging, an experienced management team and strong stakeholder support. That’s all from my end. I would now request to open the floor for questions-and-answers. Thank you, and over to you, moderator.
Questions and Answers:
Operator
Thank you. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star N2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Amit Lahoti from Emkay Global Financial Services. Please go-ahead.
Amit Lahoti
Thanks for taking my question. So the first is on margins. The EBITDA per kg continues to be towards the higher-end of the guidance range. So is it fair to assume that in 20 — FY ’26 as well, you will be doing INR19 to INR20 of guidance.
Yogesh Malhotra
Yeah. So basically EBITDA per tonne for lead is going to be in the range of INR18 to INR90 stable margins considering the more scrap from the domestic market, which leads to slightly lower margins. But we will be compensating it from a more business from the overseas market, which is a higher-margin business, more validated products, more volumes. So all these going to compensate this dip in the margin because of scrap from the domestic market. So overall, we will be in the range of INR18 to INR90 per ton for lead.
Amit Lahoti
Sure. Then the second one on projects, specifically, I am looking at Mundra. So if you could give some commissioning timeline in terms of commissioning for lead, aluminum, plastic and rubber respectively. And then how much we could be producing from Mundra alone in FY ’26
Yogesh Malhotra
So Mundra should be close to approximately 72,000 tonnes from Mundra itself approximately 6,000 tonnes per month but all the other projects in Mundhra, which we are doing expansion, so should we should be done by Q1 of next year
Sunil Kansal
— H1 of next year.
Yogesh Malhotra
Yeah. Probably H1 of next year, yeah. So which includes lithium and battery recycling and new rubber recycling unit in Mundra. So in addition to lead and plastic recycling in Mundra, we are going to increase these two verticals also in those — in Mundra facility, which will contribute to further increasing capacity at Mundra plant.
Amit Lahoti
So all of these will commission in the first-half of FY ’26. Is that correct?
Yogesh Malhotra
Yes. Yes, yes.
Amit Lahoti
And then just on Oman expansion, how is the current progress looking like?
Yogesh Malhotra
So we have plans to go and there are three projects overseas that currently we are looking at. One is Oman, of course, where we are also to fast-track, we are also exploring and evaluating to acquire an existing plant in the Gulf region and then there is this capacity expansion in Dominican Republic where we are expecting a license to establish by H1 FY ’25-’26. And then also Romania where we have acquired a rubber recycling unit where FDA approval is already in-place and most likely the transaction would be complete by Q4. So these are on the overseas expansion plans or new expansion plans or merger and acquisition opportunities that we are currently pursuing.
Amit Lahoti
Sure. And if I could squeeze in one more question, like do we have any update on RCM in battery scrap?
Sunil Kansal
Yes, the battery scrap RCM got missed because of HSN code mentioned by Ministry of Finance. So they have included Chapter 712 to 81 and the battery Chapter 85 that process is already being initiated and letters have been sent. So hopefully maybe post next GST Council meeting, it should come in battery chapter as well.
Amit Lahoti
Okay, sure. Thank you and all the best.
Operator
Thank you. The next question is from the line of Amit Dixit from ICICI Securities. Please go-ahead.
Amit Dixit
Yeah. Good afternoon, everyone, and thanks for taking my questions. First of all, congratulations for a good performance and return to 10% EBITDA margin. Three questions, if I may. The first one is on the utilization of QIP proceeds, while you provided a little bit of shape that INR245 crores has been used for repayment of borrowings and working capital. Going ahead, just wanted to get a little bit more color on this that whether it will be used for geographic — geographical expansion abroad, if you can highlight some of the commodities in which you would be interested, whether it is limited to steel and paper at the moment, that’s what we understand. Could it be utilized for some kind of copper recycling opportunity? So just wanted a little bit more color on this. This is the first question.
Yogesh Malhotra
Yeah, basically as far as utilization of proceeds is concerned. So as we have already — whatever objectives we have taken for the QIP, according to that, initially, we are going to repay the debt partly we have already repaid, remaining is to be repaid in the near-future. And after which we will be having some liquidity for — for using it in the working capital. So remaining amount will be utilized for the expansion, whatever business we are doing, additional business we are doing. So that will be utilized for the working capital. But on a longer period, when we see the opportunities for further expansion of this business, we are to take some debt again for acquiring some companies which because we are already doing — exploring some M&A opportunities in different geographies and different business verticals. So we can take again some debt and go back to acquire some companies for. And we will be doing some greenfield expansions also where we will be establishing some more units in different countries like we have — we are already doing some project in one in Dominican Republic. So that kind of projects will be there. But yes, not in copper you mentioned. So copper is — we are not exploring at this moment. But yes, other like lithium-ion expansion, rubber expansion and lead and aluminum expansion. So all these three will be there. Our new vertical will be initially focusing on lithium-ion only at this moment, but yes, we are open to explore others also. So overall in the next three years, there would be a total inflow including this INR1,000 crores of around INR2,500 crores, which includes around INR1,500 crores of internal cash generation also. So all these INR2,500 crores, out of that, we would be using around INR1,500 crores for these new expenditures and INR1,000 crores would be required in working capital — additional working capital that would be there.
Amit Dixit
Okay, very clear, sir. The second question is on the aluminum. So if you look at the aluminium volume, it has jumped up sharply compared to the last quarter or even on Y-o-Y. Have we seen some movement around the lifting on MCX that we were thinking that we would be able to hedge aluminium this?
Yogesh Malhotra
Yeah. So no, it hasn’t materialized so-far because of some technical issue at MCX because the Government of India has also introdually Government of India has introduced
Sunil Kansal
QCO quality-control order. So that was — that came in 2023, later on it got postponed. And recently it has been implemented from 1st December 2024. So now any brand, which is not having DIS of aluminum all oil will not able to deliver or sell domestically. So MCX wanted that once this is being implemented, then they will start this process. So since this has been implemented now, anytime they will be taking up this process of listing of this alloy and brand approval maybe this quarter-end.
Yogesh Malhotra
But this quarter, aluminum volumes were slightly higher because there was some inventory which was piled up and we were not able to sell because of the price fluctuations. So we sold-in this quarter and the run-rate for aluminum is going to be around 4,000 till the time we have 4,000 tonnes per quarter. So till the time we have this hedging mechanism in-place for aluminum. So we expect to grow at around 40% in aluminum in the next three to four years. So that growth is intact. That growth.
Amit Dixit
Okay. Okay, sir. The third question is on the on the scrap procurement, if you can just break it in three buckets for this quarter that how much scrap of your total usage of scrap was procured from domestic market? How much was from overseas market you kind of brought in the domestic market and how much was procured in the overseas market for the overseas sale? If you can provide in the three buckets in percentage, that would be very helpful.
Yogesh Malhotra
So around 35% 36% was overseas which we source for overseas centers only and out-of-the balance is 64%, 56% was imported scrap and 44% was scrap in India.
Amit Dixit
Okay, sir. Thank you so much and all the best.
Yogesh Malhotra
Of the total scrap that we procured in India.
Amit Dixit
Great. Got it. Thank you and all the best.
Yogesh Malhotra
And which is around 50% higher than the Q3 last year.
Amit Dixit
Okay. Sure.
Operator
Thank you. The next question is from the line of Bhavin Pande from Athana Investments. Please go-ahead.
Bhavin Pande
Hey, congratulations on wonderful set of numbers. My first question regarding scrap availability got answered. Just second question, sir, how do we foresee the risk of capacities being set-up by, you know the players from where we procure scrap, sort of they are putting together their own captive arms for recycling. So how do we tackle this risk from a long horizon?
Yogesh Malhotra
So the overall capacity in India that is going to increase because of this shift from unorganized to organized and this EPR regulation coming into place, also the RCM that has come up, we expect a 3x increase in the next two to three years from the current availability of battery scrap. And there is enough scope for everyone to come into. But so the battery manufacturers are also putting up their own units, but we believe that we will be able to manage, if not increase our market-share in domestic sector. So even if we keep the same market-share, which is what we have projected in our estimations for the next three years, that shift from unorganized to organized will be enough for us to meet our targets of 25% growth rate in the next three to four years. So because of our pan-India presence, we are logistic — we are having this logistic advantage of taking more scraps from the domestic market. So that is the reason we are very — even after all these companies establish their own capacities, we are very sure to get this volume growth from India.
Bhavin Pande
Okay. And okay. And sir, just one clarity on used cars, if we were procuring battery from them and on account of if this GST implementation on used cars on dealers. So would that have any impact on our business?
Yogesh Malhotra
So yeah, it is going to have an impact because more batteries car would now start coming from that sector also. We already have tied-up with most of these end-of-life or vehicle facilities in India and we are expecting, but it will take some time for that scrap to come. Generally, most of the old batteries actually come through a replacement market, which is around 70%. This is only going to be a very small part of that overall in the — at least next three, four years. But beyond that, probably it will improve in and we will start getting more batteries from these sectors in probably about more than five years from now,
Sunil Kansal
Actually the new regulation of use on used-car called end-of-life we call ELV policy that will be effective from 1st April 2025. So as per that regulations, the used-car will be going to RVSF, registered vehicle facilities and these RVSF will supply the five waste to the respective recyclers. Among them battery is one of the battery oil, tire, plastic and. So as soon the ELV targets are being delivered comes maybe next one, two, three years. So there will be more flow of such vehicle to RVSF and flow of battery to recycling.
Bhavin Pande
Okay. Okay. Okay. That was really helpful. And sir, just one bookkeeping. Mundra capacity would be
Yogesh Malhotra
So current Mundra capacity is 72,000 tons which we are expanding further
Bhavin Pande
Okay and it would go up to any number that you can give out.
Yogesh Malhotra
So close to 30,000 tons more around 100,000 tons 100,000 ton.
Bhavin Pande
Okay. That was really helpful, sir, and good luck.
Yogesh Malhotra
Thank you very much.
Operator
Thank you. The next question is from the line of Shwatha Dixit from Systematix. Please go-ahead
Shweta Dikshit
Hi, hi, good morning good afternoon. Thank you for the opportunity. One question on the standalone financials. If we look at the EBITDA margins that in excluding the other income that dropped to 5.6% this quarter. And this number compares to around 8.1% in the same quarter last year. So was there anything — what has actually driven this margin drop this quarter? And were there any seasonality or any one-off factors in-place in the 3rd-quarter of FY ’24?
Sunil Kansal
So actually the — generally the Indian EBITDA margins are lower than the overall EBITDA margins of the company because the domestic scrap is a little expensive and our sustainable EBITDA margins from Indian market is around INR11 to INR12 per kg and we have maintained that EBITDA margins this year. But when we talk about last year, there were certain arbitrage opportunities, which we made use of. And therefore, if you see historically, you see a higher EBITDA margins from Indian plants also. But going-forward, you can expect an EBITDA margins of INR18 to INR19 per kg on a consolidated basis. And we’ve always — I mean, we’ve always mentioned that you have to look at the entire total EBITDA margins per ton rather than looking at Indian or domestic or overseas EBITDA margin separately because of our overall operations globally, we sometimes get this opportunity where we take advantage of arbitrage and bring our material from our overseas plants into India. And that is why sometimes you will see higher revenue coming from India also and sometimes you will see higher margins also in Indian context. But overall margins would remain in the same region of around INR18 to INR18 to INR19 per kg okay.
Shweta Dikshit
So what’s your outlook? Yes, I understood. So you are saying something?
Yogesh Malhotra
No, I was asking if I was clear or not?
Shweta Dikshit
Yes, yes. I understood that. Another question would be like what’s your outlook with domestic policies customers and what is the domestic and availability. Where does the.
Yogesh Malhotra
But if we exclude if we exclude any arbitrage opportunities, the Indian — in the Indian domestic margins would be around INR11 to INR12 and overseas would be around INR28 per kg. So on a consolidated basis, you can expect INR18 to INR19 per kg margins, which does not include any arbitrage opportunity that comes up. As and when those opportunities are there, you can expect an increase of EBITDA margins going-forward. But in the longer-term period, if you ask me because of increase in value-added content and also higher capacity utilization going-forward, you can expect more value-added products, you can expect some slight increase of around KG in the next three to four years progressively.
Operator
Hello, sorry to interrupt, could you please come a little closer to the microphone and use your handset mode and speak a little louder.
Shweta Dikshit
Yes, yes, sir. I am done. I’m done with my question. Thank you so much, sir.
Yogesh Malhotra
Thank you.
Operator
Thank you. The next question is from the line of Sani Vishay from Axis Securities. Please go-ahead.
Sani Vishe
Thanks for taking my question. So continuing on the question asked by the earlier participant, so is it — so if my understanding correct, when we say that despite a higher revenue growth, the EBITDA margin was not — EBITDA growth was not that significant because in the last quarter, we had higher arbitrage opportunities. Is that correct?
Yogesh Malhotra
Yeah, that is correct.
Sani Vishe
Yeah. So we can expect similar margins as this quarter. This is more sustainable at least for in the near-term.
Yogesh Malhotra
Yes. So going-forward, as we mentioned that the sustainable margins in net would be around INR18 to INR19. In aluminium, we can expect around INR14 per kg and around INR10 per kg in plastic, but this would improve a little bit going-forward in the next three to four years where we would — where we are focusing more on value-added content and increasing capacity utilization and more volumes would also increase the EBITDA margin numbers to some extent. But these are the sustainable numbers.
Sani Vishe
Understood. And one other small question. What would be our current debt level and cash level and what do we — where do we expect it to be by the end-of-the year?
Sunil Kansal
Yeah. So current debt level is around INR340 crores and so net-debt is approximately INR600 odd crores. So in the — in the year-end, we are expecting this debt to be close to almost to zero negligible. And so we’ll be continuing with liquidity of around INR300 crore to INR400 crores by the year end.
Sani Vishe
Okay, that’s it from my side. Thank you.
Operator
Thank you. The next question is from the line of Kush Nahar from Electrum Portfolio Managers. Please go-ahead.
Khush Nahar
Hi, sir. Am I audible? Yes. Hi, thank you for the opportunity. Sir, two, three questions from my side. First, what was the percentage of domestic sourcing for our Indian operations this quarter?
Yogesh Malhotra
So overall, 44% of the total scrap that we processed in India is from domestic sources only, 56% is imported.
Khush Nahar
Okay. And sir, what would be our utilization for the aluminum plants right now
Yogesh Malhotra
So yeah, happening. So capacity utilization for aluminum is still at 46% for this nine months and approximately 48% for this quarter.
Khush Nahar
Okay. And we see that increasing going — because I think hedging will start, if I understand correctly from Q1 FY ’26 because of the delay.
Yogesh Malhotra
Yeah, still we — because we don’t have the hedging mechanism in-place at this moment. So we are still struggling for volumes in India. So as soon as we have that in one or two quarters, the hedging mechanism in-place. So we’ll scale-up this more capacities in along with capacity — more capacity utilization also. But we are expecting that in Q1, we will have that hedging mechanism in India. So hopefully, by Q1 the volumes will — you can see some increase in volumes.
Khush Nahar
Okay. And sir, one last question, so just can you elaborate more what gives us the confidence of growing at 35% in terms of profitability CAGR for the next three to four years? So what would be the growth drivers for these?
Yogesh Malhotra
So yeah, so basically, currently we are into three-product categories majorly, that is lead, aluminum and plastic. So lead is a — actually the largest — it has the largest share of around 85% and there is this new — it is getting some benefits because of EPR and reverse charge mechanism where earlier we were not having any access to the — to the local domestic scrap, which we have now started getting and we can see an increase if you see the last three years also, we have seen increase in availability of domestic scrap. We see that going-forward, it will only improve because of reverse charge mechanism also because of GST we were not getting that scrap
Operator
Hello ladies and gentlemen, it looks like the management has got disconnected. Please stay online while I reconnect.
Yogesh Malhotra
Sorry, I think — are we audible now?
Operator
Yes. Yes, sir, you are.
Yogesh Malhotra
So let me just explain once more. I mean, we are getting more scrap in India because of this shift from unorganized to organized because of battery waste management tool and reverse charge mechanism. These policies have increased — have given us more scrap in the past two years and we expect similar increase going-forward also. But apart from lead, we are also aggressively increasing our capacities both in aluminium and plastic. Incidentally, plastic also comes under EPR regulation and we see a huge opportunity in plastic also. We are also expanding overseas in all our locations, we are increasing our capacities and we are also going to increase capacities in some new geographies. We are going to go into some new geographies also. In addition, we are also planning to go into new verticals of rubber and lithium-ion battery recycling. So all-in all, we believe that all these new opportunities coming from regulations and we going into new verticals, we would be easily growing at around 25% and because of this growth and going into new verticals, there will be economies of scale, there will be a reduction in working capital cycle because we would be sourcing more scrap in India and we, as our focus would be — has already been on value-added content. So all of this will ensure that the profitability is higher than the — than the growth in revenues. So we are very confident that going-forward, 25% growth in volume terms and 30% to 35% growth in profitability is not at all a problem. And if you look at the past three, four years also, you would see a similar result where we have grown at around 22% in volumes, but on profitability terms, we’ve grown at a much higher-rate.
Khush Nahar
Great, sir. Thank you so much for such a detailed answer. Sir, just one last question. So apart from these three overseas recently-acquired businesses, are we in talks with advanced stages of — for any other company in terms of acquisition and what would be the size of these companies?
Yogesh Malhotra
So we are aggressively looking at opportunities to grow faster, both in India and overseas in the segments that we are. We cannot disclose the exact companies that we are targeting right now. But we are scouting for these new opportunities, both in India in lead, aluminum and plastic and overseas also, but I mean, as we have mentioned that we are expecting around INR900 crores, INR800 crores INR800 crores to INR900 crores in merger and acquisitions in the next three years. So you can expect us to go in and do more mergers and acquisitions in future.
Khush Nahar
Okay, sir. Thank you.
Operator
Thank you. The next question is from the line of Anurag Manthri from Capital. Please go-ahead.
Anurag Mantry
Yeah, hi, sir. Thanks for the opportunity. Just one thing on the lead volume growth. I mean, if I look at it on a Q-o-Q basis, it seems to be largely in that 3% to 4% kind of range in the last couple of quarters. So basically, I think we’ve been doing like that 40% 44 kind of number basically every quarter. So from here, how do we see an inflation in growth, like what factors do you think are required for us to see that? Is it basically the this reverse mechanism regulation coming through in the GST Council or is it like any new partnerships, etc., etc., like what needs to change for the growth rate over here to be materially higher?
Yogesh Malhotra
Thanks, sir. So whenever we talk about the overall plan of around 25% plus growth rate. The target in lead is around 18% to 20% and it’s higher in aluminum and plastic. We are expecting 40% growth rate in aluminum and around 70% growth rate in plastic going-forward. So I think we are in-line with that number, but generally, you would not see a — that growth coming in on a quarter-to-quarter basis because capacity increase do not happen in a straight-line matter. So as and when there will be a capacity increase, you will see certain increase and then you will see a period where there will be a little stagnation. But overall, you can expect around 18% to 20% growth rate in net in the next three to four years and 40% in aluminum and 60% to 70% in plastic.
Naveen Prakash Sharma
But if you see the growth rate of lead-in last nine months, it is approximately 25%. So we are aligned to the — whatever reason we have that of for led growth, we are aligned to that..
Anurag Mantry
Got it. No fair. I mean, the reason I was also asking is because I think in the nine months of last year, you also had that like in the last quarter like the December quarter of last year you also had the Red Sea issue, hence the base also bit depressed as such. But fair point that I guess as the capacity increases, I think the — there’ll be steps
Yogesh Malhotra
If you look at from Q2 also there is a 4% increase which translates to around 20%, 18% to 20% increase on a yearly basis, on an annual basis.
Anurag Mantry
Got it. Thank you, sir.
Yogesh Malhotra
Q3. Yeah.
Operator
Thank you. The next question is from the line of Siddharth Mehrothra from Kotak Insurance Equities. Please go-ahead.
Siddharth Mehrotra
Hi, sir, good afternoon and congratulations on a good set of numbers. Just a small bookkeeping question. Our capacity in the previous quarter was around 2,91,000 tonnes. Could you sort of just clarify what is our current capacity as on today?
Naveen Prakash Sharma
Yeah, current capacity, including the rubber division, which we use — out of that we use for internal consumption, the total capacity including rubber is 308,000 tonnes.
Siddharth Mehrotra
Okay. So of the total capacity addition, 291 to 308, I guess four sort of 4,000 tonnes were added in your Ghana recycling plant, which is aluminum. The balance is rubber capacity addition for internal-use, is that correct?
Naveen Prakash Sharma
Yeah. So rubber is 12,000, which is for internal consumption at this moment.
Siddharth Mehrotra
Understood, sir. Understood, sir. Got it. Thanks for the clarification, sir. Just a small question on the sort of ramp-up we are projecting for plastics. So basically what needs to sort of change in terms of the policy support for us to sort of achieve this 70% type of growth, which seems fairly aggressive.
Yogesh Malhotra
Yeah. Basically I mean there are 2, 3 things. One of course is the EPI regulation coming into place which has already started. The second thing is for RCM also to be applicable on plastic scrap, which is not currently there because there is again GST issues when you go and buy plastic scrap on the market. So apart from that, I think this — the current capacity we have is very small and even without this RCM on plastic and only with the EPR regulations in-place, we would be able to grow at around 60% to 70%. But if RCM comes into place, then the growth can be much higher. But we have to increase our capacities in plastics. We are also looking — as we mentioned earlier also, we are looking at a pet recycling opportunity also in India that would include — I mean the 70% growth includes that capacity increase in pet recycling. And we see on-the-ground that there is definite opportunity as far as plastic recycling is concerned because of this EPI regulations where more-and-more companies are now looking for recycled plastic for their packaging material. But the issue in plastic is that it is much more complicated than recycling metals because current — I mean earlier nobody was using recycled material. So developing those products is taking a little longer time. But once you stabilize those products, then definitely the growth will, I mean go exponentially high in plastic. So currently, we are working with some of the — some of these OEMs, but largely because the product — product development takes a longer time, you are seeing a stagnation in growth in plastic, but once those products get developed, then definitely you will see some in the growth rate.
Siddharth Mehrotra
Got it, sir. Got it, sir. Just one small sort of follow-up on the reverse charge mechanism you sort of alluded to earlier. So sir, what is the current status of the reverse charge mechanism guidelines which had come in earlier? And how do we sort of expect any additions or modifications to them so as to benefit us in terms of policy?
Naveen Prakash Sharma
See, as of now, the reverse charge mechanism is applicable on six or seven commodities or the supplies which are made to the government or any agri projects taken from the agri producers wherein the tax has to be paid by the receiver. And in this same process, metal scrap has already been added after 54th GST Council meeting. So now is scrap, chapter number 7281 will also come under RTM. In that case, what happens when you buy scrap from unregistered person, you pay the tax cost, deposits are tax within the same month and then you claim the refund. If it is not there, it is not mandatory. In that case, you buy the scrap from a unregistered person, but you need not to deposit the tax. You can — when you process and sell that time you can use other input tax credit ITCs, not the one which you have to mandatory pay. Once RCM is made mandatory, then first you have to pay tax whatever ITC is available. Still you have to pay that extra ITC. You cannot use old input tax credits while selling the goods. So this is a difference. So what happens in current situation when the trader buy scrap from under surferson and when they sell to recycler or, they use ITC, which is available fraudulently in the market. So that provid us to buy from such traders. This is the difference.
Yogesh Malhotra
And as Navin ji mentioned that it is already there in certain metals, but lead-acid battery because it comes in a different chapter, it was left out, but they are considering again and in the next council meeting, they would incorporate
Naveen Prakash Sharma
So it is being said that battery scrap will surely come and there are the chances that plastic scrap, which comes under Chapter 39 tire is scrapped after 40 as a paper is scrap chapter 47, they will also be part of this.
Yogesh Malhotra
So the major hurdle was in convincing the government that there should be a RCM in scrap, but now that major hurdle is passed up, we’ve already convinced the government and there is RCM on certain matters. So now extending it to other commodity — commodities would not be such a difficult task.
Siddharth Mehrotra
Okay. So basically, it would sort of benefit us only when it comes fully through on the metal scrap side, which we procure. Right now it’s only on metals. Is that sort of understanding correct?
Yogesh Malhotra
It is a metal scrap. Unfortunately, they missed battery scrap because it does not come under the same chapter as other metal scrap comes. It is in a different chapter. Therefore, they miss the battery scrap. But once now they have realized this problem and they are putting it back and it will — you will have to wait till the
Naveen Prakash Sharma
Fully lad scrap chapter is included, but battery scrap chapter is missed because major scrap is from batteries. So battery scrap chapter comes under a machine chapter, electrical electronic goods. So that’s how it got missed.
Siddharth Mehrotra
Okay, sir. Understood. Thank you. Thank you for the clarification.
Operator
Thank you. Participants, please restrict yourself to two questions. If you have any further questions, you may rejoin the queue. The next question is from the line of Bharat Shah from Ask Investment Managers Limited. Please go-ahead.
Bharat Shah
Over-time we made lot of progress in number of areas. I mean, we have expanded our manufacturing footprint and processing footprint both in India internationally hencing the complex supply-chain management issues. We have expanded verticals and gone into new areas and adding more areas. Even the regulatory thrust overall is in support of the industry, given the fact that anything which is going to eliminate or reduce position is clearly beneficial activity. And unorganized to organized per se also affords a large opportunity. So everything overall looks to be kind of very conducive. But if we if we have to think of something which has to go wrong, if something were to go wrong, what could that possibly be?
Yogesh Malhotra
I mean, in the past also things have gone wrong and we try to then work on those issues and then try to protect ourselves from those things. But some of some of the issues as we have global operations and we sell overseas markets also, then shipping costs can be one area where we have struggled in past because of that sea issue last year and something similar if comes up, then there can be these issues where you will have implications in terms of access to certain markets and then you’ll have to kind of suffer some temporary shortfalls in terms of revenues because you’ll have to then divert those materials into some other geography. So that has happened in the past. But apart from that, if you talk about we are hedged in metals, especially lead and we are looking at opportunities to hedge in aluminium because there is this cyclic metals generally, if you don’t hedge, then it is very difficult because the transit time is higher. Then there are issues in geopolitical also in certain areas because we are operating in many countries. Last year, we’ve seen some last — to last year, we’ve seen some problems in Sri Lanka. Currently also, I mean, if you look at there are certain unrest in Mozambique. So in these geographies, there can be certain issues then that can temporarily hamper your production in those geographies. But that is why we have kept a target internally that we will not increase capacities beyond 15% in any of the locations that we are in. So whenever there is a chance or there is an option where we have to grow beyond 15% in any geographies, we try to find a different geography to increase the — that capacity rather than increasing it in the same geography. So there are various issues that we look into when we talk about problems. Fortunately for us, there is no currency risk because we are in Africa, so there is a huge currency risk also, but we don’t have that currency risk because we deal only in dollars. We ship all our materials out of Africa and we are not using anything in that country. So sir, there are many risks. I mean, there is a risk of government banning import of battery scrap into India also. That was earlier a major issue for us, but not anymore now because we have started getting domestic scrap of also in India. If you look at it around 40% of that scrap, 44% of the scrap that we processed this year was domestic. And we can easily increase it to a higher number. We only have restricted it because overseas scrap is more profitable currently. But even if they ban domestic import, then even then we can be very sustainable in India. And our profitability in overseas sector would increase because the prices of battery scrap would go down overseas because India is the largest importer of battery scrap currently. So sir, there are many things that can go wrong and we try to find solutions to all those things.
Bharat Shah
So many of these issues geographic disturbance freight cost escadation or disruption. These are relatively more shorter-term issues. Structurally, anything that you thinking okay
Yogesh Malhotra
So structurally, structurally, if some — I mean so one thing that we started focusing on diversification was because I mean there is this issue that can come from disruption. Suppose something goes wrong and-or new technology comes in and battery — when lead-acid battery totally goes out of. So that can be one problem. And therefore, we have also now started planning to set-up a lithium and battery recycling unit in. So that can be one that can have and also we have — we have also set-up a target to reduce this our overall revenue that is coming from lead to around 70% in the next three years by focusing more on other commodities like aluminium and plastic. So that is also one of the issues that we see can happen in the future. So we have thoughtfully decided to diversify into other materials or commodities or verticals also.
Bharat Shah
Therefore, it will be safer to presume you have indicated 30% of the business to come from new verticals or non-laid verticals. That percentage probably presumably will further grow over-time.
Yogesh Malhotra
Yes, sir. Definitely, sir. This is assuming that we don’t go into new verticals other than the current verticals of aluminum, plastic and lead, whereas we are also focusing on other verticals of lithium and battery, steel, rubber and paper in future. So definitely it will come down. And also this is based on the assumption that there is this EPR that is there on lead-acid battery, where now we would be growing faster in lead because of more scrap availability in the domestic region. If that — so other verticals are going — although other verticals are growing at 40% or 50% on a consolidated basis, even then you can — you will only be going up to 30% because lead is also growing. But once that stagnation in lead comes in the other verticals will grow much faster and we would also go into new verticals of lithium-ion, battery recycling and paper and steel. So definitely in the next five years, six years, it can come down to as much as around 50% to 55%.
Bharat Shah
I see. And one last question. When you refer to profit growth of, yeah, about 35% compounded compared to the volume growth of 25% compounded. That profit you are referring to is operating profits, core business operating profits or profit before-tax or profit-after-tax, what is the definition of that operating profit compared
Yogesh Malhotra
When we talk about — we’re talking about both PAT and EBITDA numbers.
Bharat Shah
Okay,
Yogesh Malhotra
The same ratio. It’s in the same ratio. So around 35% EBITDA per increase in EBITDA margins and 35% increase in PAT margins also.
Bharat Shah
Sure, because there is not much of a financial leverage in any case in the business and relative level of depreciation leverage.
Yogesh Malhotra
There will be — there will be slight increase in the increase in PAT margins because once the domestic scrap availability increase, then the overall working capital cycle would reduce to some extent. And therefore, you would see more increase — so around EBITDA would grow at around 33% 34% whereas PAT would grow around 35%.
Bharat Shah
Sure. And which means return on capital employed may actually grow higher if the working capital comes down?
Yogesh Malhotra
Yes, sir. So there would probably be a small dip initially, so but the return on invested capital would always be higher than 25% and then eventually it will go up to 27% 28% in the next three, three, 3.5 years.
Bharat Shah
Okay. Thank you, Yogesh.
Yogesh Malhotra
Thank you, sir. Thank you.
Operator
Thank you. Participants, please restrict yourself to two questions. If you have any further questions, you may rejoin the queue. The next question is from the line of Parikshit from PKK Advisors LLP. Please go-ahead.
Parikshit Kabra
Hi, thank you for the opportunity. So earlier also someone raised the question. I just wanted to jump-in double down on that question. Is that last year, December quarter was a soft quarter for us because of the Red Sea issues, etc., etc. So this quarter growing at 33% on that base, is that something that we think is — like are we going to be able to sustain 33% growth going-forward or do you think this is a one-off spike and we’ll come back to about 14% to 20% growth going-forward? And you mentioned that the growth will come step-wise as the capacity comes. So when is the next big capacity going-live? When should we expect that next big step, 1/4, two quarters, 3/4, when would that be?
Yogesh Malhotra
So when we talk about — generally we talk about a three-year period where we say that the overall increase in volume would be around 25% on an average. So we continue to give the same guidance. So 33% definitely there is some aberration because as you mentioned, there was some last quarter was not. Last year Q3 was not very good. So you can expect a 25% growth rate on a year-on-year basis for the next three years. So there could be quarters where there would be — I mean, we would not grow at around 25% or grow at around — only at around 20%, 15% also, but other quarters we would grow at around 35% 40%. So that would continue to happen in the future also. And the next capacity increase you’re talking about, we are going to increase some capacity in Mundra very shortly. We have also acquired a rubber recycling unit in Romania where we are expecting to take it over in the first-quarter of — sorry, last quarter of this year or first-quarter of next year. So that again is going to give you some capacity increase. As we mentioned that we are also looking at some other opportunities and merger and acquisitions. That will also happen hopefully in H1 next year. And then of course, there are certain brownfield expansions that we are — we will be continuously doing in all of our locations, including India and overseas.
Parikshit Kabra
Got it. Got it. Thank you. And there is a foreign currency translation reserves line-item in the P&L. Could you just explain what that was?
Sunil Kansal
Yeah. So basically, because we are into various countries, so there is always a some currency plus or minus every quarter. But overall, if you see, we are fully hedged on the — on back-to-back basis because whatever scrap we source, it is all-in dollar terms. And when we sell the goods, it is also on the dollar terms. So eventually, if you see, we are not exposed to any currency risk and we are — so it is only the translation which happens on quarter-to-quarter basis that is reflecting in the P&L, otherwise and that we also consider in the operational profits because it’s a part of the operational margin. So otherwise we are not exposed to any risk or we are not having any risk of currency translations in.
Parikshit Kabra
That additional INR15 crores that is coming in the comprehensive profits that is — it’s just an accounting entry. It is not an actual profit of INR15 crores?
Sunil Kansal
Yes, yes, correct.
Parikshit Kabra
Okay. Thank you. Thanks a lot.
Operator
Thank you. The next question is from the line of Sumant Kumar from Motilal Oswan. Please go-ahead.
Sumant kumar
Yeah, hi, sir.
Yogesh Malhotra
Hello. Yeah.
Sumant kumar
So sir, can you talk about the Mundra capacity and lithium battery expansion plan? How is the unique metrics going on-going ahead? And how is scalable in next three, four years.
Yogesh Malhotra
So Mundhra capacity, as Sunil mentioned earlier also, currently is around 72,000 tonnes. We are going to take it to around 100,000 tonnes of in lead. As far as lithium-ion battery capacity is concerned, actually in the initial phase, it is only a plastic — it is only a pilot project because currently, we are not considering any revenues coming from lithium and battery in the next three to four years. So it’s only to understand the technology better to tie-up with companies to do their scrap. So it’s only a pilot project currently. We are not considering anything, but later on, once scraps start coming into the into the Indian markets from EVs, we want to be ready by that time. So you can expect growth coming forward when — after these three to four years period,
Sumant kumar
But not in the three to four-period. Okay, but yeah, but we’ll talk about the lithium scrap ability in global market. So can we import and recycle it in India or in the developed say so in Africa market, we can have a plant there and recycle it.
Yogesh Malhotra
And Africa market would not be possible because in Africa, we would not find EVs right now, but definitely we are looking at opportunities where we can import scrap into India, recycle it. But I mean, currently, we are not considering any revenues from this. But definitely we are looking at opportunities where if that is a possibility, we would go into that also,
Sumant kumar
Okay. So in the future because apart from all the vehicle lithium, we have also a solar — solar system also that it really use of lithium battery. So the overall population of lithium battery is also going to increase. So considering that, so can you also talk about how the profit margin of the lithium battery, you have already worked on the prototype. So what is the margin difference from the INR20, INR18, INR20 lead battery EBITDA per kg currently we have. So what is the margin difference or similar kind of margin will be there?
Yogesh Malhotra
No, no. So definitely, there would be higher margins in lithium and battery, but that is only a speculative thing because there is a — there is going to be huge entry barriers because the capex is higher, you have to have tie-ups because these batteries would not be available to smaller players. So they — on theoretical basis, there would be higher margins, but currently because the scrap is not available and whatever little scrap is there, it is very difficult to assertain the profitability of lithium and battery. But definitely, once the scrap is available, it is going to be much more profitable than lead said battery is what our expectations.
Sumant kumar
Okay. And last, the technology side, our learning curve and whatever are we — are we doing some tie-up or we are learning from himself or how is the — how is the understanding of the business?
Yogesh Malhotra
So both, both we have our in-house division also that is working on the technology. We are also ready to tie-up with some of the existing companies there. Generally, once we set-up that plant, we’ll have tie-up with — we are planning to have tires, as I mentioned, to source material. And the only way you can source material probably would be also with a technology transfer. So both of these things will work hand-in-hand. But at the same time, we are also looking at our own internal technology. And even if we have tie-up with anybody for technology, there have to be some work done because currently, there are very few people who are doing end-to-end recycling in lithium and battery. So the technology is still under progress. So you have to have some internal R&D that can work on that — and we have our own R&D division that is working for lithium and battery technology also.
Sumant kumar
Thank you. Thank you so much.
Yogesh Malhotra
Thank you
Operator
Thank you the next question is from the line of Amit Lawathi from Emkay Global Financial Services. Please go-ahead.
Amit Lahoti
Thanks for the opportunity again. I wanted to follow-up on your comment on debt going down to zero. So did we mean gross debt here or net-debt?
Sunil Kansal
It is going to be gross debt becoming zero by March-end as we have taken this QIB money and one of the objective was to repay the debt in a shorter-term. So initially, we are planning to you know, make the debt zero. But later on, as we mentioned, as we go for some M&A opportunities, which we are exploring currently, we will be taking some debt again in the next year. So that will be the taking the debt and going for some capacity expansion and M&A opportunities.
Amit Lahoti
Okay. So you will still do the repayment of the existing debt and then you will take on a new debt next year, if that is the right understanding
Sunil Kansal
As and when required, yes.
Amit Lahoti
Okay. And then the last question is on aluminum margin guidance of INR14 per kg. But in the last two quarters, it was INR18 to INR21. So what were the factors that contributed to higher margins and what could reverse when we get to sustainable margin of INR14 per kg.
Yogesh Malhotra
So basically aluminum, you will see these fluctuations till the time there is a hedging mechanism in-place. In certain quarters, you will see higher margins as this quarter and other times you will see a lower margins also because there is a transit time and the LME changes during these time period. So in some — if you look at our last quarter, the margins were only INR9 rupees per kg last year same quarter because the LME went down and we incurred some losses on the metal prices that time. If you talk about this quarter, we have incurred some additional profits coming because of LME going up. So on a sustainable basis, INR14 to INR15 is the margins that you can expect going-forward. And you will see a linear — I mean, you will see a sustainable INR14 to INR15 margin only once the hedging mechanism is in-place. Until that time, we will see these fluctuations happening.
Amit Lahoti
Got it. Thank you so much.
Yogesh Malhotra
Thank you very much.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing comments.
Yogesh Malhotra
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-out to our Investor Relations team. Once again, we extend our gratitude to all the participants for joining us today. Thank you, and have a great day.
Operator
Thank you, ladies and gentlemen. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.