Financials
Financials — What the Numbers Say
1. Financials in One Page
Gravita India is a ₹4,265 Crore revenue secondary metals recycler that has compounded sales at roughly 21% per year over the past eleven years, transforming from a niche ₹501 Crore lead processor into a diversified recycling platform spanning lead, aluminium, plastic, and turnkey project verticals. FY2026 was a record year on both revenue and absolute profitability — EBITDA margin recovered to 10% (matching the FY2022 peak) and earnings per share reached ₹51.32 — but the headline strength conceals a significant working-capital problem: the cash conversion cycle ballooned to 139 days, a twelve-year worst, causing operating cash flow of ₹169 Crore to land at just 45% of reported net income of ₹378 Crore, and free cash flow turned negative at −₹46 Crore. The FY2025 QIP (₹966 Crore raised) collapsed D/E from 0.65× to 0.14×; by FY2026, after a capex cycle that doubled fixed assets, leverage has risen to 0.30× D/E — still comfortable. ROCE has declined from its peak of 32% (FY2023) to 17%, largely because the equity raise and expansion spending inflated the denominator before new capacity is fully productive. The stock trades at 34.3× trailing P/E and roughly 31× EV/EBITDA (on FY2026 EBITDA of ₹435 Crore), pricing in strong earnings growth and a ROCE recovery. The single financial metric that matters most right now is working capital normalization: if the 47-day CCC widening in FY2026 reverses in FY2027, free cash flow could improve by ₹200+ Crore and confirm that FY2026 profits are real.
Revenue (₹ Cr, FY2026)
EBITDA Margin (%)
Free Cash Flow (₹ Cr)
ROCE (%)
P/E (Trailing)
FY2026 free cash flow is negative (−₹46 Cr) despite record net income of ₹378 Cr. The 47-day widening in the cash conversion cycle locked up an estimated ₹550 Cr of incremental working capital. This is the primary financial concern for the next reporting period.
2. Revenue, Margins, and Earnings Power
Gravita's profit model rests on processing spread: the company buys used batteries, cable scrap, and other waste metals at a discount to the underlying metal value, refines them, and sells the output at LME-linked prices. Revenue therefore combines volume (throughput capacity) with metal-price exposure, while margins reflect operational efficiency and scrap procurement skill rather than pricing power over customers.
Revenue has compounded at ~21% annually since FY2015, with two meaningful acceleration phases: FY2017–FY2019 (geographic expansion and capacity additions) and FY2022–FY2026 (scrap volumes scaling with battery/EV tail-winds). EBITDA grew faster than revenue in the most recent year, confirming the margin recovery is real rather than volume-driven.
Two key observations from the margin chart: First, EBITDA margin is structurally range-bound between 5% and 10% — the 5% trough in FY2019 and the 7% dip in FY2023 reflect raw-material price spikes or operational mix shifts, while the 10% peaks represent periods of favourable scrap spreads and operational leverage. Second, net margin has steadily climbed from 2% (FY2015) to 8.9% (FY2026) — not because EBITDA margins improved dramatically, but because interest costs fell sharply after the equity raise (interest expense dropped from ₹52 Crore in FY2024 to ₹25 Crore in FY2026), the effective tax rate has remained below 20%, and depreciation is modest relative to earnings.
The quarterly margin trajectory tells the most important recent story: Q3 FY2026 (October–December 2025) delivered a 12% EBITDA margin — the highest single quarter in the data series — before normalising to 10% in Q4 FY2026. The Q2 FY2025 dip to 7% (likely a commodity cost spike or unfavourable product mix) proved transitory. The current 10–12% EBITDA range represents the best structural margin band Gravita has achieved.
3. Cash Flow and Earnings Quality
Free cash flow (FCF) is defined here as cash generated from operations minus capital expenditure on fixed assets. A recycler's cash conversion tends to be volatile because working-capital requirements track raw-material prices: when lead or aluminium prices rise sharply, the value of raw-material inventory and customer receivables rises too, absorbing cash that does not appear in the income statement.
The chart reveals a pattern that should concern any fundamental investor: operating cash flow rarely tracks net income cleanly. In FY2022, ₹148 Crore of net income generated only ₹10 Crore of operating cash (7% conversion). In FY2024, ₹242 Crore of net income produced just ₹42 Crore of operating cash (17% conversion). In FY2026, the conversion was 45%. The best years — FY2023 (98%) and FY2025 (90%) — demonstrate the business can convert profits to cash, but only when working capital is not expanding.
The average CFO-to-NI conversion over FY2021–FY2026 is approximately 65%, pulled down by two weak years (FY2022 and FY2024) and one weak year in progress (FY2026). The working capital explanation is unambiguous: the cash conversion cycle widened from 65 days (FY2020) to 119 days (FY2022), compressed to 99 days (FY2023), re-widened to 117 days (FY2024), compressed to 92 days (FY2025), and in FY2026 hit a 12-year worst of 139 days. The FY2026 widening is driven by inventory days jumping from 71 to 109 (metals prices or new-facility ramp-up) and debtor days rising from 26 to 37 (credit extension to customers). At FY2026 revenue of ₹4,265 Crore, each day of the cash conversion cycle represents approximately ₹11.7 Crore of working capital tied up; the 47-day widening absorbed roughly ₹550 Crore of cash that does not appear in the free cash flow line.
Three-year average CFO/NI (FY2024–FY2026): 53%. This is below the 80–90% standard for high-quality compounders, but not unusual for commodity processors with volatile working-capital cycles. The key question is whether FY2027 reverts to the FY2023/FY2025 pattern (close to 100% conversion) or the FY2022/FY2024 pattern (single-digit conversion).
4. Balance Sheet and Financial Resilience
The most striking balance-sheet event in Gravita's history is the equity jump in FY2025: book equity surged from ₹838 Crore (FY2024) to ₹2,070 Crore (FY2025), a ₹1,232 Crore increase in a single year. FY2025 net income was ₹313 Crore; retained earnings explain roughly ₹266 Crore of the jump (after an estimated ₹47 Crore in dividends). The remaining ₹966 Crore was raised through equity — almost certainly a qualified institutional placement (QIP) or rights issue executed during FY2025. Debt was simultaneously reduced from ₹548 Crore (FY2024) to ₹286 Crore (FY2025) using a portion of the proceeds. By FY2026, debt has risen to ₹736 Crore as the expansion capex cycle required funding, but it remains well below the FY2018–FY2022 era when debt matched or exceeded equity.
Interest coverage (EBIT ÷ interest expense) reached 15.8x in FY2026 — its second-highest level historically — because interest expense fell from ₹52 Crore (FY2024) to ₹25 Crore (FY2026) as debt was reduced and lower-cost funding replaced legacy borrowings. With ₹736 Crore of debt and EBITDA of ₹435 Crore, net debt-to-EBITDA is estimated at approximately 1.0–1.2x (assuming ₹200–300 Crore of cash). There is no material near-term liquidity concern. The balance sheet's main risk is not the current leverage but the trajectory: debt has risen from ₹286 Crore (FY2025) to ₹736 Crore (FY2026) as the company funds expansion, and the quality-of-earnings concern from the working capital balloon adds a short-term cash pressure.
Credit quality indicators: No Altman Z-Score or Piotroski F-Score is available from rankings data for this company. Qualitative assessment: current interest coverage is strong; the D/E ratio has structurally improved versus the 1x+ leverage of FY2017–FY2022; no goodwill or acquisition-inflated intangibles are present on the balance sheet; fixed assets are tangible recycling plant and equipment.
5. Returns, Reinvestment, and Capital Allocation
ROCE peaked at 32% in FY2023 — one of the best return years for recycling businesses, driven by strong scrap spreads and operating leverage on a maturing asset base. Since then, ROCE has declined to 17%: operating profit grew 110% (₹207 Crore → ₹435 Crore), but capital employed grew 240% (from approximately ₹937 Crore to ₹3,188 Crore) as the equity raise and expansion investment inflated the denominator. This is a classic dilution-before-deployment pattern: the new capital is deployed in expanding fixed assets (which doubled in FY2026) that are not yet generating full throughput returns. If the new capacity ramps to historical utilisation, ROCE should recover toward 22–28%; if it stalls, the 17% trough may persist.
Note: FY2025 investing outflow of ₹864 Crore includes both capital expenditure on fixed assets and a large investment in financial assets or subsidiaries (the balance sheet shows investments jumped from ₹16 Crore to ₹528 Crore in FY2025). Pure fixed-asset capex was lower; nevertheless the combined outflow was the largest in the company's history. FY2026 investing outflow of ₹364 Crore was primarily fixed-asset capex: net fixed assets (including CWIP) grew by approximately ₹512 Crore.
EPS trajectory: EPS has compounded from ₹0.97 (FY2015) to ₹51.32 (FY2026) — a 53x increase over 11 years — on a nearly unchanged share count (share capital increased minimally until the FY2025 equity raise added roughly 5 million shares). Dilution from the QIP was modest: book equity per share (currently ₹332) grew significantly while share count rose only ~3.5%. Management has largely avoided the dilution trap.
Dividend policy: The company has paid a small dividend (approximately 13–21% payout in earlier years; the FY2026 annual data shows 0% payout in the Screener.in data, possibly because Q4 FY2026 results are recent and the final dividend declaration may lag). Dividend yield is approximately 0.36%, confirming this is a growth-reinvestment story, not an income one.
6. Segment and Unit Economics
Gravita reports four operating verticals: Lead Recycling (flagship segment and dominant revenue contributor), Aluminium Recycling, Plastic Recycling, and Turnkey Projects (designing and commissioning recycling facilities for third parties). Segment-level financial data — individual revenue, EBITDA, and margin per vertical — is not available in the structured datasets used for this analysis. Based on the business description, lead recycling accounts for the substantial majority of revenue and profit, with aluminium recycling the meaningful second contributor. The turnkey projects segment earns higher margins but is project-based and lumpy. Plastic recycling is the smallest and newest vertical.
The geographic mix has been expanding: Gravita has operations in Africa, Asia, and has been building international scrap procurement and processing capacity. International operations introduce FX and political risk but also access to cheaper or more abundant scrap supply.
7. Valuation and Market Expectations
At ₹1,763 per share and trailing EPS of ₹51.32, Gravita trades at 34.3x P/E. Against book value of ₹332 per share, the P/B is 5.31x. Approximating enterprise value as market cap (₹13,004 Crore) plus net debt (~₹500–550 Crore estimated), EV/EBITDA is roughly 31x on FY2026 EBITDA of ₹435 Crore.
Is this expensive? Contextually, yes — but with important nuances:
- For a 10% EBITDA-margin recycling business, 30x EV/EBITDA is a demanding multiple. A commodity processor with thin margins and cyclical ROCE should trade at 12–18x EV/EBITDA in most market environments.
- The counter-argument is that Gravita has demonstrated exceptional volume growth (21% revenue CAGR), a rising margin trend (8.9% net margin vs 2% in FY2015), and a leadership position in a structurally growing recycling market. The market is paying for optionality on both continued expansion and ROCE recovery.
- Historical context: Rankings and historical valuation data are unavailable for this company; no GuruFocus Quality Score or Fair Value estimate could be calculated. The premium must therefore be evaluated relative to peers and growth trajectory, not against the company's own valuation history.
52-week range: ₹1,267 (low) to ₹2,170 (high). The current price of ₹1,763 is 19% off the 52-week high, suggesting some multiple compression has already occurred.
Simple scenario analysis (FY2027 forward):
| Scenario | EPS Assumption | P/E | Implied Price | Return vs ₹1,763 |
|---|---|---|---|---|
| Bear | ₹52 (flat; WC crisis persists) | 20x | ₹1,040 | -41% |
| Base | ₹62 (20% growth; WC normalises) | 30x | ₹1,860 | +6% |
| Bull | ₹75 (46% growth; ROCE recovers to 25%+) | 38x | ₹2,850 | +62% |
The base case offers modest upside at the current entry point. The bull case requires both strong earnings growth and multiple re-expansion. The bear case — driven by sustained working-capital stress, rising debt, and a ROCE that fails to recover — implies meaningful downside.
8. Peer Financial Comparison
All figures are from the most recent available annual reporting (FY2025 for most peers; FY2026 for Gravita). All values in ₹ Crore.
The peer comparison exposes Gravita's valuation tension clearly. Against its two closest secondary-lead recycling comparables — POCL and NILE — Gravita commands a significant premium: 34.3x P/E versus 39.4x (POCL, which is actually slightly more expensive) and 10.9x (NILE). NILE's 10.9x P/E with 19.9% ROCE and 15.0% ROE looks attractively priced relative to Gravita at 34.3x with 17.0% ROCE and 16.8% ROE. The Gravita premium over NILE is justified by revenue scale (4.3x), diversification across four verticals, geographic reach, and brand recognition as India's largest lead producer — but a 3x valuation gap for similar returns is a large premium to sustain. Against JAINREC (57.9x P/E, 41% ROE, 53% three-year revenue CAGR), Gravita looks cheaper and is. Hindustan Zinc is a mining company with fundamentally superior economics (54% EBITDA margin) and is not a direct comparable. The fair-value anchor for Gravita is closer to 25–30x P/E if ROCE stays at 17%, or 35–40x if ROCE recovers to 25%+. Note: JAINREC (listed October 2025, 57.9× P/E, ROCE rising at 26.7%) is now the correct sector compounder benchmark, not POCL — Gravita's 34.3× is the sector discount, not the premium.
9. What to Watch in the Financials
What the financials confirm: Gravita has compounded revenue and earnings at exceptional rates over eleven years, driven by volume growth and steady margin improvement. FY2026 delivered the best EBITDA margin in the data series alongside record earnings per share. The balance sheet has been substantially de-risked by the equity raise, and interest coverage at 15.8x is robust.
What they contradict: The headline earnings quality is weaker than it appears. Negative free cash flow and 45% cash conversion in a record-earnings year signals that profitability is running ahead of cash generation. The declining ROCE — from 32% in FY2023 to 17% in FY2026 — means the company is not yet earning its cost of capital on the new capital deployed, even though earnings in absolute terms are growing.
The first financial metric to watch is the cash conversion cycle in the Q1 FY2027 quarterly results (expected July–August 2026). A normalisation of the CCC from 139 days back toward the 92–99 day range seen in FY2023/FY2025 would confirm that the FY2026 earnings are real, release approximately ₹200–400 Crore of working capital, and justify maintaining the current premium multiple. A failure to normalise would validate the bear case — that earnings growth is largely accounting, capex is not earning adequate returns, and the 34x P/E is unsustainable.