GRAVITA INDIA LTD (NSE:GRAVITA) Q4 FY23 Earnings Concall dated May. 03, 2023.
Corporate Participants:
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Vijay Kumar Pareek — Executive Director
Analysts:
Sabri Hazarika — Analyst
Keshav — RakSan Investors — Analyst
Unidentified Participant — — Analyst
Dhaval Shah — Girik Capital — Analyst
Nikhil Rungta — Nippon India Mutual Fund — Analyst
John Shepherd — Batteries International — Analyst
Abhijit Sinha — Pi Square Investments — Analyst
Khush Nahar — Electrum PMS — Analyst
Abhijit Vora — SHAREKHAN by BNP Paribas — Analyst
Chirag — RatnaTraya Capital Partners — Analyst
Gunjan Kabra — Niveshaay — Analyst
Rohit — Vijit Global — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Gravita India Limited Q4 and FY ’23 Earnings Conference Call. 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. [Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over to Mr. Sabri Hazarika from Emkay Global Financial Service. Thank you and over to you, sir.
Sabri Hazarika — Analyst
Yeah, good afternoon, ladies and gentlemen, and on behalf of Emkay Global Financial Services, I welcome you all to the Q4 FY ’23 post-earnings conference call of Gravita India Limited. We are pleased to have the management of Gravita India led by Mr. Yogesh Malhotra, CEO and Whole-Time Director; Mr. Sunil Kansal, Chief Financial Officer; and Mr. Vijay Pareekh, Executive Director.
So today’s session would be a brief on the company’s results and corporate developments by the management, and then we’ll follow it up with the question-answer round. So now I request Mr. Yogesh Malhotra for the opening comments. Over to you, sir.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, thank you, Mr. Sabri. Good afternoon, ladies and gentlemen, and welcome to our Q4 and FY ’23 earnings call. I believe you have had an opportunity to review the earnings presentation and financial results that were uploaded on the stock exchanges. Before opening the floor for questions. I will provide a brief overview of the major highlights of FY ’23. I’m delighted to share that Gravita India has delivered stellar results for Q4 and FY ’23.
Before we delve into the results, let’s go over to some strategic highlights and project updates. It gives me great pleasure to announce that Gravita step-down subsidiary Gravita Netherlands has been granted EUR34 million ESG loan by European Development Finance Institutions. This facility was approved after detailed due diligence on environmental, social, and government — governance aspects. This would enable Gravita’s offshore businesses to gain financial independence in terms of their capex and working capital needs. The facility is guaranteed by the parent Gravita India Limited. This loan is a testament to the company’s continued efforts to build a more sustainable future and commitment to its motto of We Recycle to Save Environment.
I’m also pleased to announce that the Board has approved a final dividend of INR4.35 per share making Gravita a consistent dividend payer with 12 years long track record of sustainable dividend payouts. Gravita has signed an MOU to develop a battery recycling plant via a JV in Oman with an annual capacity of 60,000 metric tonnes per annum in Phase 1. With the establishment of this Gravita won’t expand its entry into the Middle East. The company has also expanded the net recycling capacity at the Mundra facility to 60,000 metric tonnes per annum. In addition, value-added production of red lead with a capacity of 4,800 metric tonnes per annum and plastic — plastic recycling capacity of 7,500 metric tonnes per annum has also begun at Mundra.
The company recycling aluminum in Togo and Senegal and Plastic in Ghana this year. Additionally, the company has a 1,300-kilowatt capacity of solar energy generation, which is anticipated to produce two million kilowatt hours of energy annually. This will support the goal we might [Technical Issues] its carbon footprint by lowering carbon emissions by 1,550 tonnes annually.
Let’s now discuss the operational performance. In financial year ’23 Gravita has shown a growth in capacity to 2,051 metric tonnes per annum. We anticipate expanding each year and realizing our goal of reaching 425,000 metric tonnes per annum plus capacity by financial year ’26 for our existing verticals. The company has witnessed a volume growth of about 11% in Q4 financial year ’23 on a year-on-year basis. Net volume increased by 13% and aluminum volume grew by 31% on a Y-o-Y basis. Gravita has incurred a capex of INR108 crores, up 50% from financial year ’22. This company is committed to expanding its capacity and hence is expecting to incur a capex of more than INR600 crores by financial year ’26 for its existing as well as new verticals.
Tax collections for Indian plants 26% in Q4 financial year ’23, compared to 40% in the last quarter. We believe that redefining battery waste management rules extended producers’ responsibility and sector implementation of GST posted and we continue to enhance scrap availability for the formal recycling industry. As a result of this, the battery scrap collection in India grew by 23% to 13,100 metric tonnes in Q4 from 10,700 tonnes in Q4 2022.
Moving to Q4 financial results. Consolidated revenue for the quarter is INR749 crores, up by 20% on a year-on-year basis. This rise in revenue can be attributed to a 11% increase in sales volume. Revenue from value-added products stayed at 55%. On a year-on-year basis adjusted ebitda increased by 17% to INR85 crores. EBITDA margins improved to 11% as the company continued to maintain strong margins. Gravita reported a strong consolidated PAT of INR65 crores with a 40% growth year-on-year. PAT margins also improved to about 8.5% compared to 6.2% in the last quarter. Going forward with the financial year ’23 financial results consolidated revenue increased by 26% from INR2,216 crores to INR2,801 crores. The five-year CAGR growth stood at 22% and the company is committed to achieving 25% sales volume CAGR by financial year ’27. Adjusted EBITDA including other income for financial year ’23 stood at INR286 crores, which is up 33% on a year-on-year basis. Consolidated PAT increased by over 44% to INR201 crores. PAT margin for the year improved to 7.18% compared to 6.18% in the last financial year. The five-year PAC’s CAGR stood at 25%, which is in line with the company’s vision.
Additionally, I would like to inform you that the company has reduced its debt by INR40 crores plus in financial year ’23 and is committed to reducing it even further going forward. The Company’s ROCE stands strong at 29% compared to 12% in financial year ’19. The company has managed to improve its net working capital cycle from 95 days in March ’22 to 83 days in March ’23. The company aims to reach the target of 65 days by financial year ’26.
Over to you, Sabri, I am through with my opening remarks.
Questions and Answers:
Operator
Thank you very much. Now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Keshav from RakSan investors. Please go ahead.
Keshav — RakSan Investors — Analyst
Hi, good afternoon, sir, congrats for a really good quarter. Sir, our plant capacity expansion for next two years are pretty substantial. So do you think we should grow at a much higher clip — to a much higher clip through FY ’25, so FY ’24 and ’25, two years?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So there are two portion of this growth in the next two years, basically one is expansion of their capacities at our existing plants in our existing verticals. And then, so which is expected at 25% year-on-year basis volume growth of print. Then the second part is coming from the new verticals, we have plans like rubber. We have already started one plant at Ghana but we are replicating that rubber recycling at other locations also shortly in the next two quarters we will be replicating into other locations and then we are also adding new verticals of steel recycling, paper recycling, and lithium-ion recycling in the next two to three years. So this will help us to grow faster than the growth earlier, we did of 22% in the last five years.
Keshav — RakSan Investors — Analyst
Sure. And sir, the INR600 crore capex, how much of it would be India-centric, and how much would be ex-India roughly?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So basically, again INR600 crores includes the new vertical capex of approximately INR250 crores. So our remaining capex of around INR350 crores. The capex will be in the similar ratio like 40% should be overseas and 60% in India but for the new verticals approximately 80% to 90% capex is outside India.
Keshav — RakSan Investors — Analyst
Okay. So, sir, post the CSD loan facility, where do you see our console cost of debt going forward?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Sorry. Cost of — cost of debt. So, cost of debt, the existing cost of debt is approximately 8.5% and with this new facility, we are going down to approximately 6.5%, giving of approximately 2%.
Keshav — RakSan Investors — Analyst
That’s on a consol basis, right?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Sorry. Yes on a consol basis as always.
Keshav — RakSan Investors — Analyst
Okay, okay. Thank you, sir. That’s all from me. Thank you.
Operator
Thank you. [Operator Instructions]. Next question is from the line of Vikash from [Indecipherable]. Please go ahead.
Unidentified Participant — — Analyst
Thank you. I think one thing is there in the last Q4 presentation in FY ’22 whatever the written statement is there because there was there and you mentioned this is a business statement of 026. But again, in this Q4 you mentioned the same line as the present 2027, any specific reason is that repeated when the year has changed.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, sure. So basically what we are doing is that we are giving you visibility of next four years. So when we were in 2022, then we get for either for visibility of the numbers for next four years. So the visibility of next four years is similar to the visibility of last four years. So the numbers are same, but then it is one year extended for the similar numbers like 25% growth will be continued till 2027 instead of 2026 earlier.
Unidentified Participant — — Analyst
So that means.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Rolling basis visibility of next four years.
Unidentified Participant — — Analyst
Okay, but then the visibility in the next four years is the same thing is there.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yes.
Unidentified Participant — — Analyst
Apart from that right now, our value-added product is at 35% and our target is 50% is there but there is the team will be achieving in FY ’26-’27 development.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yes, yes. Same will be achieved in 20%.
Sunil Kansal — Chief Financial Officer
Current number is 43%. We target it to 50%.
Unidentified Participant — — Analyst
This is a 43%, and 50% we’ll achieve in FY ’26 or ’27.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yes, because in the two to three years, we are expanding the value-added production in the — our overseas facilities also. And also we are starting the like, we have started red lead production in our Mudra facility. So we are currently value-added production of red lead and let’s say it was only, only to the extent of Jaipur plant, but now we are replicating this model to other locations also.
Unidentified Participant — — Analyst
Okay. Which other locations apart from Jaipur?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Like Mundra, we have just started so that is added. So Ghana we are starting and also we are starting in alloys, starting in other locations like Senegal and Zimbabwe.
Unidentified Participant — — Analyst
Okay. Well, thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Dhaval Shah from Girik Capital. Please go ahead.
Dhaval Shah — Girik Capital — Analyst
Yeah, hello?
Operator
Yes, sir.
Dhaval Shah — Girik Capital — Analyst
Am I audible? Yes, hello, sir, attending the call for the first time. Great set of numbers. So just two broad questions. So, first is taking the lead about the current profitability and the total capacity which you’re guiding by FY ’26. Is it safe to assume that at full utilization we will do around INR900 crores of EBITDA at the company level?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, so EBITDA is growing by 35% every year. So we have other than the volume growth visibility we have also given the visibility of the bottom line like EBITDA terms and the bad terms. So it will be 25% percent growth on the profitability, EBITDA price but we are more focusing on the return on capital because there are certain businesses where the working capital cycle is lower, but at the same time, the margin is also lower, so rather than only focusing on the EBITDA per ton or EBITDA percentage. So we focus on return on capital, so I guess to keep the return on capital minimum showed off 25% plus and so that is a more focus area for the company.
Dhaval Shah — Girik Capital — Analyst
Yeah, so in the full for the fourth quarter our EBITDA per ton has been around INR20,500 rupees. So and by FY ’26, we are going to do like 434,000 tons — 434,300. So between today and FY ’26 full utilization will our product mix be significantly different, which will lead to a change in this 20,500 EBITDA per ton.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So 20,500 but ton is only for the lead. So there are different per ton EBITDA for different products, so 20,000 is for lead, and 17,000 for aluminum and plastic, it is approximately INR10,000 per ton.
Dhaval Shah — Girik Capital — Analyst
Okay.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So the product mix in the next two to three years will be changing because we will be more doing the other products will be like aluminum and plastic will be growing faster and there will be some more verticals coming in. So we see, always, the EBITDA per ton of the different products individually. So we don’t see on an average basis but yeah, going forward with more volumes coming in there will be economy of scale benefit of also be there and we will be on the. EBITDA percentage terms, we will be better as compared to what it is today.
Dhaval Shah — Girik Capital — Analyst
Okay Sir, do we receive any sort of subsidy or any grant from the government?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
We don’t get a grant on a regular basis but yes, there was only one grant, we got it for the establishment of two plants in Andhra Pradesh. So that was there but other than that there is no specific grant for any product or business.
Sunil Kansal — Chief Financial Officer
It’s not a grant for manufacturing, basically, it’s a grant to setup an industry in that state. So it’s only a one-time subsidy that the government has given in establishing a manufacturing unit in that state. Apart from that, there is no grant on recycling or anything like that.
Dhaval Shah — Girik Capital — Analyst
Okay, okay. Okay, understood, understood. And sir, we are planning around INR700, INR650, INR700 crore capex till FY ’26. So, how is it going to be financed?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, so majorly this will be financed from the internal accruals, but considering the upcoming requirement of the working capital also. So we will be taking consciously some debt also approximately INR200 crores, INR300 crores of debt, additional debt in next two to three years but on the debt side, we are very comfortable and we are very consciously taking the debt in terms of like debt-EBITDA should be below 0.75 debt, equity should be below 1.5, so considering all these numbers, we are very comfortable debt-EBITDA. We are 1.2 and debt-equity we have 4.6. We have consciously taking that, but it will be more funded from the internal accruals, majorly funded from internal accruals.
Dhaval Shah — Girik Capital — Analyst
Okay. Thanks. So maximum you will take is around INR300 crores debt. So, by the time, the capex cycle is over our balance sheet in FY ’27, might have a total debt of around INR700 crores we are increased to INR50 crore. So around INR650 crore.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So that is one way of looking at it. Second alternative is to value at the right time to by raising some equity from that market also. That again, that is another option two.
Dhaval Shah — Girik Capital — Analyst
Okay, okay, and sir, could you give some examples of similar business model at the global scale where the companies have grown big in size and then also, which you look forward to in terms of the business model and scale, what they’ve achieved. So basically, I think the model that we are in, where we are doing across geographies and also into different verticals. There is no other company that in our is that is doing something similar but if you’re talking about, I mean there are indifferent fields in aluminum there are different companies were recycling. Similarly in lead also there are companies that are doing battery recycling but mostly are only in one particular field and doing only one product category. So you will not find companies that are into many other verticals. I mean they are — which are doing recycling in different verticals. Okay. Great sir. Thank you. Thank you for the answers.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Thank you.
Operator
Thank you. Next question is from the line of Nikhil Rungta from Nippon India Mutual Fund. Please go ahead.
Nikhil Rungta — Nippon India Mutual Fund — Analyst
Yeah, hi sir, thanks for the opportunity. Sir, couple of questions from my side. To start with on the debt side, it, if you can just. I mean, you highlighted that you might company market for raising either equity or debt as well. So if I have to put it this way, what was the maximum leverage that you will be comfortable with? That would be helpful.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, so leverage — current leverage if you will see that the current level is approximately one but we can go up to a maximum of 1.2.
Nikhil Rungta — Nippon India Mutual Fund — Analyst
Okay, so beyond the 1.2 we will go for equity raising wondering right, no more further debt payment, right? Sir, second is on capex of this INR650 crore over the next three years. So when is it that we’ll start seeing the result of the capex in other numbers?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, so capex whatever capex we do in the year one, so 8x to 9x of revenue generation happens in the next year. So it is a rolling capex. So every year whatever, like this year we have did, we did capex of around INR108 crores. So next year we can see the 8x revenue generation from that number.
Nikhil Rungta — Nippon India Mutual Fund — Analyst
Okay, okay. And even from the new verticals in which we are planning INR4,500 and 105 crores, so very next year we’ll get better, it will be up to two to three years monthly and…
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
New verticals may take slightly more time to be stable on the results coming in. So like we expect one and now — instead of one year, it may be one-and-half years to two years in case of paper recycling and tree recycling the new verticals.
Nikhil Rungta — Nippon India Mutual Fund — Analyst
There also we will get asset turn of 8x to 9x, right?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, certainly.
Nikhil Rungta — Nippon India Mutual Fund — Analyst
Okay, sir, last question from my side. We are also into aluminum recycling. I mean there are concerns that because of EV this led recycling might come under pressure, but aluminum recycling would be a big opportunity going forward. So your plan, I mean, if you can slightly elaborate on aluminum recycling.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So basically, to answer your question, first of all we have already mentioned this many times with the EV lead recycling would not, I mean it is not a threat to lead recycling because even in an EV you would require a lead-acid battery because it’s basically to do the starting lighting and ignition and auxiliary function. Right. So with the lead let us inventory would not go away, but of course, it will give you an opportunity to recycle lithium-ion batteries, also which is replacing the changes. So that is the first part. The second part, of course, is the aluminium recycling, of course. I mean, with now most of the car bodies, etc are using more and more material which is lighter, earlier they were using steel, etc, now, aluminum frames are very common. Apart from engine, I mean, total capacity or total requirement for aluminium is increasing every day. So we believe that there is a bigger opportunity for aluminium, even at current levels aluminium is around. Once this IAC engine is replaced. So but a lot of battery casings and other extrusions will come in the picture. So the existing Aluminium consumption in a car will be going at least 1.2x, 1.3x. Okay, okay. And the current aluminum recycling, which we are into that’s finally the car bodies itself other aluminium. Currently, we are into cast aluminum recycling. So those are mainly engine, pistol any castings, which uses for the cast purpose and alloy wheel also cost part. So these are the two parts. The body’s mainly of steel that is nearly sheets and extrusion, but in time to come we can recycle that as well.
Nikhil Rungta — Nippon India Mutual Fund — Analyst
Okay, and currently the scrap for aluminium would be coming from outside only, it will be import.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Currently, it is mostly imported, we talk about Indian recycling, but in overseas, we are recycling local scrap generated because India doesn’t have any specific policy. The cars, which we’re using which are now redundant may be 25 years old cars they are not having much aluminum but with this policy of old vehicle policy additionally, scrap policy is that trucks and buses will come commercial vehicles. They are mainly of iron, steel item, but once the new ways car come for recycling, but that will take time in India. So then they will be more of aluminium availability there.
Nikhil Rungta — Nippon India Mutual Fund — Analyst
Got it, sir. Sir, last question from my side. We have got this ESG funding which you have just announced today morning. So this EUR34 million loan, if you give some, I mean not the exact numbers, but how is it compared to the existing borrowing for us? Will it benefit us significantly and cut down our cost of funding, or how is it?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, so there are two this one is that. It will be improving the liquidity for our overseas business and India business. So that is one. And second is the cost-saving for our business because the current borrowing cost is approximately 8.5%, which will come down to 6.5% after these new borrowings. So, and another part is that because they have done detailed due diligence on the environmental and social, and governance aspects in overseas business for the overseas business especially, Ghana and Senegal, which is a bigger, bigger subsidiaries for us. So it is also — it is basically certification for us to that we are following all the environmental standards IFC standards globally at our overseas plants. So this way, it is going to help us indifferent times.
Nikhil Rungta — Nippon India Mutual Fund — Analyst
Got it, got it quite helpful, sir. Thank you so much and all the best for the future.
Operator
Thank you. [Operator Instructions]. The next question is from the line of John Shepherd from Batteries International. Please go ahead.
John Shepherd — Batteries International — Analyst
Yes, hello gentlemen. Good morning or good afternoon, everyone. I also have a follow-up question about the loan that’s been announced today, I understood what you think about helping to reduce borrowing costs, but will any of these loans, support the project in Oman, which, of course, Gravita Netherlands was associated with?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
We couldn’t hear the question properly. Can you come again, please?
John Shepherd — Batteries International — Analyst
Yes, of course. I was trying to say about the loan that’s been announced today. Can you hear me clearly?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yes. Yes. We can hear you clear enough.
John Shepherd — Batteries International — Analyst
Right. I appreciate you said it will help reduce overall borrowing costs and so on but will it also be used to support the project in Oman with that Gravita Netherlands is associated with the recycling project there?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
New funding is only for the African business at this moment and Oman will be majorly funded from the internal accruals for the — for the Group. I see, so that means then, will you be expanding lead recycling in Africa as a result of this loan?
Not only lead recycling aluminium, plastic recycling also and probably we will set-up a steel recycling plant also in Africa. So it’s not only our electric segment and as far as Oman is concerned. I think in Oman, we have the option of cheaper fund availability also.
John Shepherd — Batteries International — Analyst
Okay, perhaps the final question if I may, who are your partners in Oman?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So they are local Omani partners that we’re working with who are already in the trade of scrap there.
John Shepherd — Batteries International — Analyst
Okay, thank you very much, gentlemen. I appreciate the call.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Thanks a lot. Thanks a lot.
Operator
Thank you. Next question is from the line of Vaibhav from Enam Holdings. Please go ahead.
Unidentified Participant — — Analyst
Hello, Yogesh ji. Congratulations on great results.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Thank you.
Unidentified Participant — — Analyst
I think two questions. One, if you could please just give us some more color on this new capex on the new vertical on the INR200 crores that you are spending just. I know you guys obviously are very clear on capital allocation and obviously, you must be seeing some strong opportunity there. So if you could just give us some color on what the season higher thinking about what I’ve seen.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So in the existing verticals which is lead, aluminium, plastic, and rubber we will be spending around INR70 crores to 80 crores in the next four years, which will be approximately INR300 crores in the existing verticals and another INR250 to INR300 crores of — I mean of CapEx would be for new verticals, which is, as we mentioned, we are planning to have a steel recycling project in Africa, we are also planning to put up a paper recycling facility in Central America, and apart from that pilot projects for lithium recycling in India. So these are the three major projects which are which we are considering right now but apart from that we have enough surplus money available to look for some mergers and acquisition opportunities if it may come across or maybe a smaller project for any other vertical also.
Unidentified Participant — — Analyst
Okay. And my second question on plastics that what is sort of happening over there in terms of the capex, the growth, the opportunity, and especially the regulations that we were expecting to kind of help formulize the sector.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
See plastic EPR not we are not involved much because we are into the plastic recycling which is mostly our own recycling of batteries. But when it comes to — in other areas the similar grade of polypropylene we can certainly see that we can fulfill the EPR targets from the paint industry. So this EPR policy is still not, plastic has come out with the registration is currently going on for the recycling industry. So once that finishes up then probably that push that is required for the EPR to start happening in India would happen. So, that is what we are focusing on. And then also the scrappage policy probably will be a source for raw plastic that is going to be available for us going forward. So these are the two areas, which will give you the push going forward in plastic recycling in India. So it is still to take-off the like lab recycling has taken off, but we are expecting, because right now — because if you talk about lead recycling it is directly affecting the companies that buy lead whereas in plastic recycling, what is happening is that most of the companies that are affected are companies that use plastic as a packaging material. So for them to understand it completely, it is taking a little longer but once that starts happening, probably we’ll see a lot of opportunity in the plastic recycling also.
Unidentified Participant — — Analyst
Okay, understood. Thank you so much and best of luck.
Operator
Thank you. Next question is from the line of Abhijit Sinha from Pi Square Investments. Please go ahead.
Abhijit Sinha — Pi Square Investments — Analyst
Good evening, sir. Could you just take us through how you plan to add these different verticals that we have in mind in the next three to four years in our vision for ’27 and what would be the different yields between these segments?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So I mean, generally the major factors for us to put up any recycling our new vertical is to see whether there is enough availability of raw material, at the right price for us because we are present in many locations we have our own procurement yards in many locations across the globe. We can see some opportunity. We are currently seeing some opportunities in steel recycling in Africa and paper recycling in Central America. So what we do initially, as we just tried to first of all understand the whole market scenario for any particular vertical, wherever we want to go into, and in the second phase, we just try to trade some material to see whether what is the depth of the total available material in that geography and what price we would be able to sell and all those things. So in steel and in plastic we are in the cycle, sorry, in steel and in paper recycling in the second phase, where we are now understanding the whole business mechanism of this recycling in those regions, specific regions, basically. Probably it will take us six more months to understand it completely and once we are through with our feasibility, then we will set up a plant in both these locations for steel and plastic — for steel and paper. If that is what you are asking.
And in terms of, I mean, we have a targets of EBITDA margins and ROC to see whether it matches with our philosophy of going forward with 25% ROC or not.
Abhijit Sinha — Pi Square Investments — Analyst
No, sir, makes sense, what I actually meant was, let’s say, we’re talking about lithium recycling, e-waste recycling all these kind of segments that may even thinking about adding into our portfolio, right? So, in what stages are we actually looking maybe in ’25, we might start with e-waste, lithium.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So lithium-ion is a little different because we believe that the raw material for lithium-ion will not be for the — for recycling in India for the next six-seven years. So what we are doing is, but at the same time, even in lithium and right now there is no proven technology also. So we are putting up a pilot project to understand how the lithium recycling would work. So it’s just a pilot project. It’s not a full-scale project, which will give you a, it’s more of a strategic business unit that we’ll be putting in where probably profitability will not be that important but what we want to understand is to set up a technology that is that will suit lithium-ion recycling in India. So it’s in a very nascent stage currently, it’s not something that we have done complete homework on in terms of profitability and all, but for the other two steel and paper, it’s basically a simple project because the technology is proven, I mean it’s not of rocket science, and it’s very similar to lead or aluminium or plastic recycling.
Abhijit Sinha — Pi Square Investments — Analyst
Is it difficult to do the steel and paper over here in India as well?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So as we mentioned that it basically depends on the raw material pricing is available and the opportunities available from which you can make more money. So even in India if you look at steel recycling or paper recycling, most of the raw material comes from overseas. So a lot of, well gets wasted in the logistics cost. So if you put up the plant overseas itself from where we are importing those materials you save on those logistic costs also. And at the same time all these countries wherever we put up those plants also require finished products. So for example, a country in Central America would be exporting a lot of scrap paper out of that country but at the same time, they will be importing a lot of finished products. Having corrugated paper also into the country. So by putting up the plant itself in that country itself you will save on a lot of logistic costs. So that is the idea behind having those operations overseas, rather than having it in India.
Abhijit Sinha — Pi Square Investments — Analyst
Understood, sir. There are a lot of EVs could come from recycling companies here in India, I think 85% is unorganized, so how does that look for India, a segment that we are interested in?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So again. I mean, till the time, India can find a solution to separate these things in an organized, I mean take this recycling into the organized sector probably it will be very difficult to compete with the unorganized sector, because what is happening in India mostly is that people are refurbishing rather than recycling it. So you’re going to compete with the, I mean, the unorganized sector, because again then paying GST, etc, everything else, you don’t become competitive enough to compete with this unorganized sector. So till the time EVs start happening in the organized sector, probably it will be very difficult to compete.
Abhijit Sinha — Pi Square Investments — Analyst
Is it difficult for us to lead the change as far as?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, it is for any one company, it would be very difficult.
Abhijit Sinha — Pi Square Investments — Analyst
Okay. So then we require the other.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
The qualitative — then it needs to be supported by the policy. So we’re not asking for any subsidy or anything else, what we are asking, is basically a level-playing field where all of the companies whether they are organized or unorganized, go through the same, I mean, in the same manner, I mean they are treated in the same manner. So unless and until it is probably it will be very difficult.
Abhijit Sinha — Pi Square Investments — Analyst
So at the moment, the government is supporting primarily lead recycling, if I’m not wrong?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
No, it’s not. Goverment is trying to support recycling, even in an organized manner for all the sectors. So they are bringing in policy — changing policies because there are loopholes in some of the policies, so government is trying to fill those loopholes but it will probably take some time for the EVs policy also too, I mean, so that people cannot take — not misuse that policy. Currently, most of the people who are doing the EVs recycling are generally, it’s basically refurbished, it’s only eye wash. They are actually not recycling it.
Abhijit Sinha — Pi Square Investments — Analyst
Understood. And sir, due to this recycling that we are doing, it would require a lot of power consumption, right, so then. I would just second the financials. This accounts for only about 1% of our top line, so how does that, how do we do the accounting for the power cost?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So in metal recycling generally, it’s not the power cost, it’s basically the fuel cost that is, I mean is the biggest component. process. So in power, actually it’s a very-very small cost, but fuel cost is a little higher than power cost for us.
Sunil Kansal — Chief Financial Officer
And fuel cost is accounted for in the material cost basically.
Operator
Thank you. Sorry to interrupt you, Mr. Abhijit, I request you to join the queue again for a follow-up question. The next question is from the line of Khush Nahar from Electrum PMS. Please go ahead.
Khush Nahar — Electrum PMS — Analyst
Hello. Am I audible?
Operator
Yes, you are.
Khush Nahar — Electrum PMS — Analyst
Yeah, thanks for the opportunity, sir. So, I had two questions. One was, how is the progress on the shift that is going on from the unorganized to organized segment. And second is, any particular reason for our volume growth year-on-year to be 12% which it seems a bit lower than our other quarters and next expected volume growth in the next two to three years.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
The shift from the informal to formal sector, the new regulation, which is known as a BWMR that has come, and under that BWMR, there will be EPR on battery lead-acid battery where all batteries will come under EPR, which were not there in earlier rules which were known as DMHR. So this EPR in-process all registration from the manufactured side are done means battery manufacturer and importer and stays with the recycler will be that is said on this and the manufacturer has to fulfill the EPR targets. And if they don’t fulfill, then there will be some penalty. So this entire process we’ll shift the existing informal volumes, which is almost 65%, so we foresee that from this 65%, 30%, 35% volume will shift to formal sector, so there is a use growth potential. In the formal sector. What was your next question?
Khush Nahar — Electrum PMS — Analyst
Hello. My next question regarding new growth expectations over the next two years?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Growth expectations are in volume terms is around 25% year-on-year for the next two years, for the next four years actually. So there may be a slight, I mean on a quarter-to-quarter basis or sometimes even in a unit rehab business. And also what we do, because we have our own capacities in India as well as overseas so sometimes what we do is we bring that material into India. So you don’t see the volume growth as such, because then we process it in India and then it gets next eliminated in the consolidated figures. Whenever there is an opportunity where we can, I mean, take advantage of arbitrage in Indian prices and overseas prices. So for us, what is more important is the profitability growth. So in volume terms also, we have grown more than 12%, but only 12% gets reflected in — in the consolidated figures.
Khush Nahar — Electrum PMS — Analyst
No, sir. Thank you.
Operator
Thank you. I request all the participants, please restrict to two questions per participant. If time permits, please come back in the question queue for a follow-up question. The next question is from the line of Abhijeet Vora from SHAREKHAN by BNP Paribas. Please go ahead.
Abhijit Vora — SHAREKHAN by BNP Paribas — Analyst
Yes, sir. I have a couple of questions initially. When I go to the segmental [Technical Issues] turnkey projects. There be a segmental margin profit increase very sharply to around 90% discount in this quarter. So any specific reason why the other segments are largely stabler relying on a sequential basis?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, sorry. I couldn’t get your question, please. Can you repeat, please?
Abhijit Vora — SHAREKHAN by BNP Paribas — Analyst
Sir, in the segmental thing we and in the item called turnkey projects, I mentioned that segment earnings EBITDA we had in this quarter were significantly higher of INR9.6 crores, INR3,300 has been, yeah.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So basically, what was happening because of COVID in the past two years there was not many new projects coming up in the lead recycling across the globe but now that has started, so this year we have sold some projects outside and that is why we’ve got in this fifth vertical of projects around the INR9 crore rupees. Going forward also, you can expect something like this, because we have an order book of around INR25 crores to INR30 crores. And generally, it gives you a 40% gross margin. So going forward also, you can expect something similar in numbers from the projects department also.
Abhijit Vora — SHAREKHAN by BNP Paribas — Analyst
Okay. And hedging lease, the other income part like are there, any one-off in that and adjust, when do you thin aluminum exclude something from that to arrive at the adjusted impact number.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, so there is other income part, there is majorly hedging income, which is part of the operational income. So we consider it as part of EBITDA because there hedging, the strategy for the company like whatever metal prices, metal price risk, we cover from the hedging that — so that is reflected here. So that is other than that there is no significant one-off item, which is there in this, so which can be only to the extent of some interest on the fixed deposits and all that. That’s the only and which is recurring in nature. So there is no one-off case of in other income.
Abhijit Vora — SHAREKHAN by BNP Paribas — Analyst
Okay. What is that hedging amount in each?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So in this year, FY ’23 out of INR93 crores of other income INR88 crore was related to the hedging part, so remaining only INR5 crores was related to the interest on the other fixed deposits and etc. So these INR88 crores is considered in the EBITDA calculation because it’s a part of the operational income.
Abhijit Vora — SHAREKHAN by BNP Paribas — Analyst
Okay. And sir a couple of more questions. Any guidance on the tax rate for the full year?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, tax rate currently is 11% for the Group, but going forward, it should be in the same range, 11% to 12%.
Abhijit Vora — SHAREKHAN by BNP Paribas — Analyst
Okay. And then lastly sir, last quarter it was mentioned that we keep control from around INR500 crores and monetizing that as very revised upwards by INR100 crores. So is there any change in like cost of 210 in the bank?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, so there is no significant change, but other than the capex — capex opportunity for the existing vertical and new verticals. So like newer because we have considered, there is more visibility on the new verticals so that’s why we have kept this target of INR600 crores of capex in the next four years. So that’s the, let’s say it was.
Abhijit Vora — SHAREKHAN by BNP Paribas — Analyst
So there has been no corresponding change in the net capital expenditure guidance. It remains at the same level. I was wondering like on headcount numbers.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, but there will be no significant change in the next four years, at least.
Abhijit Vora — SHAREKHAN by BNP Paribas — Analyst
Okay. Okay. Thank you.
Operator
Thank you. The next question is from the line of Chirag from RatnaTraya Capital Partners. Please go ahead.
Chirag — RatnaTraya Capital Partners — Analyst
Hi, good afternoon. Thank you so much for the opportunity. Just I wanted to just clarify the volume growth, again, a little bit this quarter has been introduced lower-than-average. Are there any other one-off or any particular reasons here and also on an ongoing basis, I understand that pricing can change, the profitability at least the headline number a little bit but the volume growth also be a lot more volatile. And if that is the case, why would that be?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, so volume growth target is 25% for next year on a year-on-year basis next three to four years. So this volume growth like this year it was 17% as compared to the FY ’22. This volume growth is slightly changing because there are certain times when we get some additional margins by selling most of the overseas units in the Indian market because Indian market gives — sometimes Indian market gives a better realization because of the Indian demand of the metal in India. So at those times, the volume gets reduced because we import that overseas material to India and utilize the Indian capacity is to process those goods to get that additional margin but overall if we compromise on the volume growth, definitely we are focused to have more growth on the bottom-line side. So bottom-line growth of more than 35% is more important than the volume growth. So we will be compromised, sometimes on the volume growth to get to the more bottom-line growth. So that is our idea and with the more bottom-line growth we get to more ROCE. So overall, the focus comes on the return on capital.
Chirag — RatnaTraya Capital Partners — Analyst
Understood. Okay. This quarter was something like that, then, yeah, a lot.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yes. Correct. If you see the EBITDA of lead, normally it should be in the range of INR16 to INR17 per kg, but this time it is INR20 per kg. So we got this additional and your EBITDA margin is also 11%, which is not, in general, it is not there, so but at those times we compromise on the volumes.
Chirag — RatnaTraya Capital Partners — Analyst
Understood. And the combined on volumes what you mean is that both plants, the overseas plants, and the Indian plants could have processed good, but instead of that what you’re doing it, you have directed metal from outside, scrap from outside, and to the Indian plants and the processing is happening in the Indian plant and that offsetting is reducing the volumes, is that the right understanding?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Correct, correct, correct, yes.
Chirag — RatnaTraya Capital Partners — Analyst
One more question, sir, just on Page 26 of the investor presentation. This time we have started to give a quarterly breakup of the domestic scrap collected. Is that inclusive of the tolling business, or is this just the outright scrap that we get it?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, so this is including the total scrap collection in India. So this is this is including both tolling also and other corporates also.
Chirag — RatnaTraya Capital Partners — Analyst
Okay, understood. So, this compared to be around 43,000 ton, different macro is largely correct. What was the similar number for last year for the number being for last year, particularly?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So, it was approximately, number, the number was 41,000 approximately.
Chirag — RatnaTraya Capital Partners — Analyst
This is currently 43 maybe.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah.
Chirag — RatnaTraya Capital Partners — Analyst
Understood. Thank you so much. If I can squeeze in one more question otherwise I’ll get back in queue.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Sure.
Chirag — RatnaTraya Capital Partners — Analyst
Nicaragua divestment, could you just give us a little bit more brief on that? What was the thinking there, and is there any learning from that sort of venture’s plant that got by? If you can just give a few comments on that. Thank you so much for the opportunity, sir.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, basically Nicaragua plant was where we were processing this uptick, pet recycling, we were doing in Nicaragua. That was exclusive plant for this type of recycling. So we started Nicaragua plant with more potential we saw is that we can get the volumes, more in those geographies and we can expand to other verticals also but later on when we realized that there are no such potential volumes are not coming up to that extent because of certain geography reasons and there were some management bandwidth also consuming, this was also consuming, the bottom-line target of return on capital target of 25% was also not. We were not able to achieve that. So then we decided to exit from Nicaragua and invest that money which we realized on other geographies where like their nearest geography is the Dominican Republic where we can plan for a bigger facility for similar kind of plastic recycling, and along with the paper recycling and there another potential of lead recycling in those geographies. So we are very focused on the return on capital with target of 25%, so wherever we see that there is no such potential to grow that — to that number to that extent, we prudently exit from that location. So Nicaragua has got some of that investments.
Understood. Very clear. Thank you so much.
Operator
Thank you. The next question is from the line of Gunjan Kabra from Niveshaay. Please go ahead.
Gunjan Kabra — Niveshaay — Analyst
Hi, thank you for the opportunity. Sir, I wanted to understand that how much capacity we expect — expecting to in the rubber recycling. How much capacity, are we planning to install by FY ’26 also? And what kind of EBITDA per ton do we see in this segment in rubber recycling, and also in the new segments that we’re targeting, which is steel, paper and lead, of course, earning was side but and paper also, how much are we targeting EBITDA per ton.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So EBITDA per ton for different verticals is like lead is approximately INR16 to INR17 per kg, INR16.5 per ton, and aluminium because this is overseas business 80%, 90%, overseas business. So it is INR18 to INR19 rupees per kg and plastic case it is approximately in a normal case it is INR10 per kg. So the capacity expansion for plastic. We are expecting to reach to approximately 85 — 80 — 80,000 tonnes in the next four years. So that’s the target for plastics.
Vijay Kumar Pareek — Executive Director
And also for rubber, we are currently at 6,000 tonnes and then we reach to approximately 16,000 tons in next four years.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So currently, in case of rubber, we are just focusing on the internal use of this outcome of the plastic [Technical Issues] and additional number to this. We are we can possibly account. [Techical Issues].
Gunjan Kabra — Niveshaay — Analyst
Sir, your voice is not audible, I’m very sorry, but your voice is not audible.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So, basically in rubber current capacity is around 6,000 metric ton per annum, which we are expecting to increase it to 50,000 metric tons to 16,000 metric ton in the next four years, but that is basically for the — for captive consumption only. In addition to this, we are also planning to put up other standalone rubber recycling projects, which will be in addition to this capacity of 15,000 metric ton per annum.
Gunjan Kabra — Niveshaay — Analyst
Okay. So, sir rubber is basically a forecast captive consumption. So where is it used in products?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
So, so out of rubber we get pyrolysis oil, we also get steel and carbon. All these three things are used for our smelting processes in lead aluminum. So the pyrolysis oil replaces fossil fuel similarly carbon replaces wood charcoal. So all these things basically is also a major component in sustainability for our operations.
Gunjan Kabra — Niveshaay — Analyst
Okay. Sir, paper, what is the EBITDA per ton are we targeting?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Steel and paper?
Gunjan Kabra — Niveshaay — Analyst
Steel and paper where we plan to expand. So you must be thinking of some EBITDA per ton, right? So what will be that when we start the recycling for steel and paper? So I’ll tell you something. EBITDA per ton would be different for different verticals based on different geographies, it is very dynamic thing. So eventually this which geographies are we going to put in, because you must understand that for example, paper, is a very small, so the, I mean, per ton paper would be around 50m, I mean $50 to $80 per ton as compared to lead being $2000 per ton. So there is a huge difference in terms of that, but at the same time the total capex cost is very-high in these things. So based on these two things, the EBITDA margins would be different but if we talk about on a benchmark figure for, say, for example, in future, around 18% to 20% EBITDA margins would be there for steel and around 30% to 35% EBITDA margins would be there for paper but it will be in terms of percentages, in terms of absolute number, it will be much lower, because the price of the commodity is very less compared to the steel or steel, so I mean compared to the lead or aluminium prices that we hear.
Operator
Thank you. Sorry to interrupt, Gunjan, I would request you to join the queue again for a follow-up question. I request all the participants, please restrict to one question per participant. The next question is from the line of Rohit from Vijit Global. Please go ahead.
Rohit — Vijit Global — Analyst
Thank you for giving me the opportunity. First of all, congrats for a good set of numbers. My question was major overseas operations are from African countries like Ghana, Senegal, Mozambique, and Tanzania, are there any specific reasons to it and what are your plans for expansion in these locations?
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, so basically there are two-three options to expand in new geographies. One is like wherever we are in these existing verticals. So we are already at 60% to 70% market share of those verticals in those geographies. So another opportunity is to expand into other verticals like we are already replicating the new verticals like earlier, we added aluminium, so now we are in the process of replicating aluminum recycling at all the locations like Senegal this year we have started Senegal and we are also adding new vertical rubber recycling at all the locations plastic recycling at all the locations. So whatever we start new that we replicate at existing locations because in the — it is very difficult from 670% to reach to 90%, but it is very easy compared to add new verticals instead of going in that. So this depth of more economic scale. So we are going back to two things, one is, existing location with the new verticals and new location with the new verticals and that existing vertical also.
Operator
Thank you. The next question is from the line of Abhijeet Sinha from Pi Square Investments. Please go ahead.
Abhijit Sinha — Pi Square Investments — Analyst
Hello, sir, thank you for the follow-up. I just wanted to understand what is the demand for our these value-added products that we are currently having. And also, how do we sustain this 25% to 30% growth for the next three years of business, it’s quite a substantial growth rate. Yeah, in fact, if you see the value-added products we are diversifying not only to the battery industry, lead and battery industry, but although we are targeting to power cable, chemicals and pigment industry, and radiation industry. So in each and every locations like India and, if you are having renewed capacity in producing. We are in we have added the capacity in and also expanding this capacity to user location. Till-date we not adding value-added capacity in operation center. So we are putting up even capacity in Ghana center also so that the European and hereby in Turkish. So we are pretty sure that what is the — we are targeting for the 50% of or would you should go to the value-added industry, it will be reached. Moreover, like the cost of production, if you see Europe vis-a-vis India, it’s much different. So it will be a positive for so from India to meet in case the want of the European market.
Operator
Thank you. The next question is from the line of Sabri Hazarika from Emkay Global. Please go ahead.
Sabri Hazarika — Analyst
Yeah, good afternoon, sir. And this is the last question. So thank you so much for this call and for the insight. Sir, just wanted to know if this new debt facility you have already drawn it or it is right now. it’s a facility now.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, so currently we have just signed the document loan document from this European Development Financial Institutions, but in the next one or two months, we will be drawing this money and using this money to lease out — release liquidity for our Indian facilities.
Sabri Hazarika — Analyst
Right, sir. Right now, this money will replace some debt, right. So that will be like or it will be like on fresh capex only.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah partly approximately 4 to 5 million is for the fresh capex, and remaining is going to replace our working capital requirement of the overseas business, so it will be used in overseas business, but it will release the working capital use currently Indian money is used for the overseas, working capital, so that will be released from that overseas markets. So in overseas business will be self-dependent from this money.
Sabri Hazarika — Analyst
Right, sir. Got it, sir. Thank you once again for this call and congratulations on a good set of numbers. And so with this, we come to the end of this call and I request you for the closing comments, sir. Thank you.
Sunil Kansal — Chief Financial Officer
Thank you, Sabri.
Yogesh Malhotra — Chief Executive Director and Whole-Time Director
Yeah, thank you, Sabri. Financial year ’23 was a tremendous year for our company across all fronts and we are confident that by pursuing new opportunities will continue to grow and fulfill our clear vision for 2027. We hope that we have addressed all of your questions, if you have any unanswered inquiries, please do not hesitate to contact our Investor Relations team at Go India Advisors.
I would like to express my gratitude to all of the participants for joining us on this call and listening to our updates. Thank you all once again. Thanks.
Operator
[Operator Closing Remarks].