Gravita India Limited (GRAVITA.NS) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to 3Q and FY '26 Post Results Conference Call of Gravita India Limited, hosted by Antique Stockbroking. [Operator Instructions] I now hand the conference over to Mr. Manish Mahawar from Antique Stockbroking Thank you, and over to you, sir.

Yes. Thank you, moderator. On behalf of Antique Stockbroking, I would like to welcome all the participants on the 3Q FY '26 Earnings Call of Gravita India. We have with us leadership team, represented by Mr. Yogesh Malhotra, Whole-Time Director and CEO; Mr. Sunil Kansal, Whole-Time Director and CFO; Mr. Naveen Sharma, Executive Director; and Mr. Anant Jain, Investor Relations on the call. Without any delay, I would like to hand over the call to Mr. Malhotra for opening remarks, post which, we will open the floor for Q&A. Thank you, and over to you.

Thank you, Mr. Manish. Good afternoon, everyone, and welcome to our Q3 and 9 months FY '26 earnings call. I hope you have had an opportunity to review the earnings presentation and financial results uploaded on the stock exchanges. I'm pleased to share that Gravita delivered a consistent performance in Q3 and 9 months FY '26, reflecting steady progress across operational and financial parameters in all major business verticals. In 9 months FY '26, the company delivered year-on-year growth of 9%, 15% and 32% in revenue, EBITDA and PAT. Before delving into the results, I would like to take a moment to highlight our ongoing expansion plans and strategic updates. There have been some delays in our capacity expansion plans, although broadly, we are progressing as with installed capacity now at about 3.40 lakh metric tonne per annum. We expect to cover it up in the upcoming quarters to meet our medium-term target of scaling this up to over 7 lakh metric tonne per annum by FY '28, in line with our focus on building a larger and more diversified recycling platform. On the investment side, we have earmarked a total CapEx of INR 1,225 crores through FY '28. Of this, around INR 850 crores is being deployed towards strengthening and expanding our existing businesses, while the balance will support entry into new recycling verticals like lithium-ion batteries, paper and steel. During the first 9 months of 2026, we have already incurred CapEx of about INR 125 crores. At Mundra, lead capacity expansion of 83,000 metric tonne per annum is targeted for completion by Q4 FY '26. At Jaipur, lead capacity expansion up to 45,000 metric tonne per annum is target for completion by Q4 FY '26. The Mundra Rubber project is slated for commissioning in [ Q1 ] FY '27 with revenues expected to begin flowing from Q2 FY '27, aided by stabilization of the Romania operations as well. Gravita Netherlands B.V., our step-down subsidiary, has approved an additional investment in Gravita Europe SRL through the acquisition of 3.5 lakh shares, representing a 15% stake. Post this transaction, GNBV's shareholding in Gravita Europe SRL will increase from 80% to 95%, further strengthening our presence in the European market. On the operational front, the regulatory environment remains favorable for organized recyclers. Stronger enforcement of the BWMR and EPR frameworks has enhanced accountability across producers, recyclers and collection agencies, leading to more efficient collection channels, reduced leakages to the unorganized sector and improved traceability. These measures have materially increased domestic scrap availability, driving higher local sourcing. In terms of volumes, Q3 FY '26 saw a modest sequential improvement overall. The lead segment reported steady growth on both Y-o-Y and Q-on-Q basis. The Plastics segment recorded a strong rebound with volumes rising 55% Q-on-Q to 3,160 metric tonne. In contrast, aluminum volumes declined on both a year-on-year basis and quarter-on-quarter basis. The decline in aluminum volumes during the quarter was primarily driven by higher metal prices in the market. In such periods, scrap aggregators typically withhold material in anticipation of further price increases, which temporarily tightened scrap availability. This led to lower procurement and consequentially reduced processing volumes during the quarter. As prices stabilize and scrap flow normalizes, procurement is expected to improve, supporting a recovery in aluminum volumes in the coming quarters. Lead, aluminum and plastic EBITDA per tonne stood at INR 14,215 and INR 10,462, respectively. In Q3 FY '25-'26, revenue remained flat on both year-on-year and quarter-on-quarter basis at INR 1,017 crores. Adjusted EBITDA stood at INR 116 crores, up 13% year-on-year and 4% quarter-on-quarter, with margins remaining strong at 11.41% plus, supported by operating efficiencies and mix improvements. PAT increased by 32% year-on-year to INR 97.67 crores with PAT margins remaining healthy at 9.60%. Gravita is progressing strategy towards Vision 2029 backed by a clear road map to scale its core business while expanding into new recycling segments such as lithium-ion, rubber, steel and paper. The company is targeting strong growth metrics, including a volume CAGR of over 25%, profitability growth above 35% and ROIC exceeding 25%, alongside increasing the non-lead segment's contribution to 30% of revenue, raising renewable energy usage to 30% and reducing energy intensity by over 10%. With more than 3 decades of experience, 13 environmentally responsible facilities and a presence in over 70 countries, Gravita is well placed for sustainable long-term value creation, supported by disciplined CapEx, capacity expansion, operational efficiency and strong governance. 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.

[Operator Instructions] First question comes from the line of Amit Lahoti from Emkay Global Financial Services Limited.

My first question is on capacity expansion projects. Like you highlighted there was a delay. So what were the bottlenecks in the last 2 to 3 months, which led to this delay?

Sir, we already have the installed capacity there, but there is some delays from the government authorities in giving the license to operate because of various reasons in Gujarat because of this vibrant Gujarat into play. So some of the government officials are not regularly attending the offices right now. So we are expecting this to probably happen in either month end of January or maximum in Feb itself. So in this quarter, we are expecting both the [indiscernible] as well as Mundra plant to get the license to operate.

Okay. So is there a change in government stance on recycling and hence, there is no sense of urgency around the approvals? Because even for other regulations like reverse charge mechanism, we have been waiting for quite some time, but government support hasn't been coming so far. And then there is a delay in approval. So is there a trend or this is just like one-off kind of a delay that we are looking at?

It's a one-off a kind delay because these consent to operate are given by state governments and not the central government. And I mean, it's not that they have told us not -- because we already have CTE, which is the consent to establish. So that we've already got. So generally, after that, they just inspect your site to see whether it is in line with the approval they have given. And once they are sure, they will give you the consent to operate. So it's merely a formality, but because of not -- I mean, because of this vibrant Gujarat theme, they are not regularly attending the office. So that is why the delay is there, but we are very confident that it will happen now in this quarter itself.

Okay. Got it. My second question is that our margins have been holding up pretty well and above our guidance consistently. But still our guidance remains where it is like INR 19 to INR 20 per kg, but we have been reporting INR 23 per kg. So at what point do we leave this restraint and holding the guidance because our peer group is already talking about margin upgrades for quite some time.

Sir, I think the margin would remain at around INR 19 to INR 20. As we mentioned earlier that we sacrifice some revenues to ensure that these margins are intact. And our -- so that is why -- because there are arbitrage opportunities. So we ship some material from our African plants into India, taking advantage of those benefits. So fortunately, for us, for the last whole year, that has been the case. So there has been some arbitrage opportunities, which we have been able to benefit from. But consistently getting more than INR 19 to INR 20 margin, we'll have to probably wait for maybe 6 more months to see whether we can sustain these kind of margins or not.

Okay. Got it. And lastly, a housekeeping question. What was our domestic versus overseas mix in Q3?

Sir, domestic, because as we mentioned that there were some arbitrage opportunities and also we were having a lot of stock in place because the capacity expansion is taking place. So we wanted to stock up all the raw materials. So we have reduced some local purchases. So overall, in the quarter, how much was the...

So quarter, it was 25% from domestic and 75% was imported. So -- but overall, we should be back to the normal one, which is around 45% from domestic and 55% from the imported one. So once we have the capacity live.

[Operator Instructions] Our next question comes from the line of [ Nilab Jadhe ] from [ Asmo ] Research.

My question is that as per your opening remarks, whatever you mentioned then, is the top line growth is not expected to pick up before FY '28. Is my understanding correct? Because you are -- see metal is all at boil currently and people are expecting it is also moving up. And you are telling that procurement of the raw material is a challenge because suppliers are holding it. So -- and then your capacity expansion also get delayed. So how would we interpret these 2 issues?

Yes. So in terms of capacity expansion, as I mentioned that we are very confident of getting the expansion in line in the next few quarters. So the Indian capacity expansion is going to be there in Q4 itself. As far as the vendors holding up scrap is concerned, generally, it's a short-term thing because their holding capacity is also not that huge. So -- but generally, when there is an increase in prices, they generally tend to hold some of their inventories. But the moment the prices stabilizes, they will start releasing those inventories. So I don't think that it is going to be -- and even if the prices increase from here onwards, because their capacity is limited, they will not be able to hold more than that. So it will start coming -- it has already started coming to us, and we believe that we will be back to the normal numbers in the coming quarters.

Okay. And see, another thing then if I take -- if -- in the raw material prices are elevated, then your margins will get hit or you are taking a cost-plus approach so that you don't think that will be an issue?

No, no, not at all because we buy scrap at a discount over the LME prices. When the prices increase, also the absolute price of the scrap increases, but the percentage of the scrap remains the same. So the margin between the selling price and the buying price remains intact, more or less.

Our next question comes from the line of Amit Dixit from GS.

A couple of questions from my side. One is more of a macro question on the adoption of EPR and BWMR, particularly how we are seeing -- what is the progress of the trading of aluminum alloy on MCX. So if you can briefly highlight these because these are some of the tailwinds that will drive our performance. That is my first question.

Okay. So on the part of EPR and battery waste management rules, this has already been reviewed. And yesterday, NITI Aayog has recommended a few recommendations, strengthening the EPR process, strengthening the portal and linking of all data from GST and portal. And there are further collection rules are also being framed. So we are hopeful that by April 1, 2026, these rules will be amended or modified and SOP will be created for collection site in battery based management rule and also audit rules are also being formed for EPR. And when it comes to MCX on aluminum, so this is also under consideration with MCX, and I'm hopeful in FY '26, it should come by Q1 of FY '26, '27.

Sir, just wanted to understand the constraints behind that because we have been expecting this for over a year. And there has been a very limited progress around particularly the trading of aluminum on MCX. So just wanted to understand where the bottleneck lies? Or is it something regulatory or something that is being discussed with the government or there is something that is some data that they are looking at. Just wanted to understand the key constraint.

Constraints are over. The key constraint was that it has to get passed through under Security Contract Regulation Act. So that took almost 1.5 years. And it came from Ministry of Finance and Ministry of Mines and BIS. Now the second part was creating a contract that also has been formed by MCX. Now it's a call of MCX, their business call because they will be the one who will be the beneficiary as a platform, exchange platform. So there was a certain gap because there was change of their higher authority, CEO change was there in somewhere in November, and it has already discussed in their meeting. And frankly speaking, the call has to be taken by MCX. Regulation is over, and that's their business call. And they also created specification committee also, but any time they should do it.

Okay, sir. The second question is more of a bookkeeping question. If you can mention the revenue and profit from overseas, I mean, percentage terms.

So we -- I mean, it's not right to understand our profitability from overseas, and you cannot differentiate the overall profitability, as we mentioned earlier also, that there were areas when we import those materials that we process overseas into India for further processing because Indian market is better. So the profitability would keep on changing. But just for your knowledge, around 72% of the profits -- revenue came from India and 28% of the profit -- revenue came from overseas. So as per profit, as per profits also 72% was from India and 24% was from overseas.

The next question comes from the line of Sucrit Patil from Eyesight Fintrade Private Limited.

As Gravita scales its recycling operations across lead, aluminum and plastics, how do you see capacity utilization and product mix evolving over the next 1 to 2 quarters? Specifically, what technical levers such as process automation, backward integration or efficient improvements are you using to enhance the process and maintain global competitiveness while maintaining ESG commitment? That's my first question. I'll ask my second question after this.

Yes. So if you look at our capacity utilization, it's in India, more than 90% capacity utilization is there. So incidentally, we also have our own project division, which works with the operational division to keep on reinventing things on how processing is being done, how to bring in automation, how to improve technology. And that is why in terms of our operational cost and yield, we are better than the competitors across the globe. And not only do we use our own plant and machinery, we also supply turnkey solutions to people doing lead and aluminum recycling across the globe. So that gives us an edge as compared to all our competitors. And what was your other question, sir?

My other question is to Mr. Sunil. With margins supported by cash -- by steady cash flow, how are you planning to sustain profitability while funding expansion into new recycling verticals? From a technical standpoint, what is your framework for managing working capital cycle, hedging raw material price volatility and optimizing capital allocation to ensure ROE stays steady over the medium term?

Sir, I can answer your question because this has been the policy of the group that whatever new verticals we will go into or whatever brownfield expansions also we do should meet one of the criteria, and that is the return on investment of around 25% from all our new ventures. So that is intact. And that is why whatever products we choose, whether it is currently lead, aluminum, plastic or going forward, we are planning to go into steel, aluminum -- steel, paper, lithium-ion. We will ensure that it meets this criteria of 25% ROCE. So that remains the core of the business strategy that we have.

But overall, on the funding side, we plan to spend approximately INR 1,200 crores in next 2 to 3 years for CapEx and approximately INR 1,500 crores will be needed for working capital. So we have something in liquidity, which we generated through QIP in last year. And remaining is to be funded from the internal accruals, which we generate as cash flow in the next 2 to 3 years. And additionally, we may take some debt to a limited extent where we plan to raise some debt up to some limits -- -- within some limits. So we are fully confident of taking this growth fully funded from internal accruals and liquidity we have.

I think the last part was very important.

Our next question comes from the line of Aniket Madhwani from Steptrade Capital.

I just want to know the volume generated this quarter, I mean in lead, aluminum and plastic. As you mentioned, there is a decline in volume in aluminum. So could you just clarify on the numbers?

So the lead total quantity that we sold lead is around 46,269 tonnes, we've sold around 3,500 tonnes of aluminum, 3,550 tonnes and 3,160 tonnes of plastic scrap. So total overall numbers are 52,982 tonnes.

Okay. And so have you recognized any revenue from rubber or lithium-ion segment? I mean...

Lithium-ion is not functional right now. It will probably come in this quarter. The consent to operate for lithium is also expected to come in the next couple of days probably. It's in process. Whereas rubber definitely, currently, we are just using it for in-house consumption only. So there has been no revenue coming from rubber.

Yes. It's a very significant revenue, which is coming from our Romania facility, which has just started in this quarter itself, which is almost INR 3.5 crores in this quarter itself. But going forward, we have plans to scale up this Romania facility also in rubber.

Okay. Got it. Got it. And so you previously mentioned that you are targeting to achieve a 25% CAGR in volume terms. So that should be reflected in your top line as well, right, as 90% -- across 90% of your revenue comes from the lead segment. So here I can see in the last 3 quarters, we have achieved around INR 3,000-odd crores. So what are you expecting to close in Q4?

Sir, there are 2 things here. I mean, although when we talk about volumes, we generally talk about the production volumes because as I mentioned earlier that some of the material that we produce in our Africa plants, when there is arbitrage opportunities, we move that material into India and process it again here. So it gets eliminated when we talk about the overall revenue growth in terms of volume. So -- but if you consider that, then we have grown at around 8% to 9% overall in -- if you don't eliminate that part. In Q4, as I mentioned that we are expecting some expansions to take place -- capacity expansion to take place. So because of that, we would see some volume increase coming in the Q4.

Our next question comes from the line of Kunal Devendra Kothari from Nuvama Wealth Management.

Sir, my first question is that we are adding up around 125 Kt of lead in quarter 4 FY '26. So by when you think we can optimize fully? Does it take a quarter or 2 or we can ramp up it fully? This is my first question.

In H1 next year, we'll be able to ramp up. Some of the volumes will start coming from Q4 itself, but major incremental volume will start coming from Q1 and Q2 of next financial year.

So by Q2, we can -- we will be able to fully ramp up?

Absolutely sir.

Okay, sir. Sir, second question is on CapEx. So we did around INR 125 crores CapEx in first 9 months. But the trend, what we are seeing is declining from around INR 650 million in quarter 1, INR 400 million in quarter 2 and now INR 200 million in quarter 3. So what is the specific reason for the declining trend? And secondly, you had target of around INR 200 crores of CapEx for the entire FY '26. So how much you think that it is achievable? And adding to that, by FY '28, as you mentioned, the total CapEx will be higher of INR 1,200 crores. So with this declining trend, how you see that you will be able to catch up and achieve this target?

I couldn't hear your first question properly. But to answer your second question, we've already done a CapEx of around INR 125 crores till now. And we are expecting it to cross INR 200 crores by Q4. So we will meet the targets that we set for FY '26 for capacity expansion. And the second thing is that you should also look at the total capacity rather than the CapEx done because in some of the cases, we have done capacity expansion in brownfield projects rather than greenfield projects. So the overall CapEx required to do that has been lower than what we had envisaged earlier. So that is probably the reason why the CapEx is lower, but the capacities would be in line with what we have told that would happen by FY '28.

Sir, any specific reason that bulk of the CapEx is coming in quarter 4?

Some of these CapEx was supposed to come in Q2 also. But as I mentioned, there have been some delays from our side in terms of setting the plant up. And then there have been some delays for getting those approvals also. Otherwise, some of these CapEx was expected in the Q2 and Q3 also, but there have been some delays, we admit that.

[Operator Instructions] Our next question comes from the line of Sagar Shah from Spark PWM.

Congratulations, sir, for better-than-expected margins actually. Now my first question was related to actually our CapEx. You highlighted we incurred around INR 125 crores in CapEx. So just wanted to clarify one thing. The 30,000 tonnes additional capacity in lead, has it been -- which you highlighted in Q2, has it been fully commissioned in this quarter? And another one, 45,000 tonnes of lead, which was going to come up in Q4. So is it on track? So just clarify on first -- my first question is on the CapEx front. And then I'll highlight my second question.

So to answer your question, the one plant in Jaipur, we are expecting a capacity increase of 45,000 tonnes by Q4 of this year. And in Mundra, we are expecting 80,000 tonne capacity in Q4. Further increase of [indiscernible].

So in all by -- in all in this Q3, another 30,000 tonnes has already been commissioned in the Phase 1 lead expansion?

Q4, 125,000 tonnes of lead capacity expansion would be expected, not in Q3; Q4.

Okay. So basically, by Q4, 125,000 tonnes will be commissioned by Q4 FY '26 that you're highlighting, right?

Yes, yes.

Okay. And so -- and in our plastics and aluminum, there is also some sort of capacity expansion also. So is it safe to assume that the capacity expansion will be done in these 2 segments also or only lead you are planning to expand?

Not in this year, but next year, definitely, there are some capacity expansion. In aluminum, the capacity expansion, we are holding up because we want to get an MCX approval first. So as Naveen-ji mentioned that we are expecting it by Q1 of next year, and then we will start -- starting expansion in aluminum capacities. But plastic capacities will start happening in next year also.

And in addition to this, we are also adding capacity in India in next year. And lithium-ion also is expected in Q4. So all these capacities would come in next year.

Okay. Okay. My second question was related to the Plastics segment. Plastics segment, we are running at low capacity utilization, but our margins have come very friendly actually. So the capacity utilization hovers at around 40% if we compare these 9 months actually. So going forward, I wanted some color on the plastics demand and on the kind of products that we are dealing in this segment? And what is the outlook going ahead as well in this segment?

Sir, so as I mentioned that plastic growth will all depend on how the industry would take to secondary plastics going forward because most of the industry is not using secondary plastic for their primary packaging. They are using it for secondary or tertiary packaging, but primary packaging has yet not started in most of the cases. So we are targeting that segment because that is more profitable compared to other segments. And it's a slow process in the sense that you have to develop that product, you have to start using -- testing those products, start using those products for years before you give -- go ahead to start using that product on a regular basis. So it's a slow process, but we are very confident we are making inroads into this. We are developing new products for new customers. And we are very hopeful that although the direction is right. But the moment it will start happening, it will just take off. I mean -- but currently, you can expect a slow growth of around 8% to 10% for the next couple of quarters. And then probably we can increase further.

So can you highlight what are the products that you are planning to make in plastic? It is PP granules or what kind of products?

So we are making PP granules, but that is specific to the customers' requirement of their packaging requirements. So for example, Asian Paints require recycled plastic for their bucket or battery manufacturers require PP granules for their battery boxes and so on and so forth. So all the brand owners require different kind of products. And it's a little difficult to develop those products from secondary plastic. But we are working with some of these OEMs and developing products for them.

Next question comes from the line of Vinayak Kariwal from Xponent Tribe.

Sir my question was on the lead volume. So what we are selling in the export market, we are mostly selling to South Korea, UAE. But according to some reports, the lead volumes demand in these countries are saturated and thus many of our peers are starting to sell a big chunk of their lead volumes to Singapore and the traders sitting there. So why are we not selling our volumes to these traders sitting in Singapore? And do you see any benefit to selling your volumes in Singapore because of the demand situation in these countries?

Sir, currently, our volumes are so low that even if there is a decrease in demand, we'll be able to sell all the material that we produce or manufacture to the OEMs directly in Southeast Asia. And generally, in Singapore, you sell it to traders and not directly to OEMs, which does not give you the higher margins that we get. And our target is to keep selling 70% to the OEMs and 30% to the traders Currently, we have long-term tie-ups with major OEMs also and some of the biggest traders also, whether it is Trafigura, Glencore, [indiscernible] We work with almost all the traders, and we work with almost all the major OEMs within India also and outside India also. And whatever products we are making, we are just trying to sell it at the highest price. So if there is any pressure from those OEMs, then we may think of shifting it to other geographies. But till the time we are getting enough orders from them, which can fulfill all our production, then we don't need to go to these other markets. We want to maximize the profit by selling it to the highest bidder actually.

So you are not seeing any demand saturation from these OEMs currently and like comfortably you could maybe push the incremental volumes from your capacity to these OEMs?

Sir, and then I mean, we also have applied to LME, and we probably would get our LME license also in Q4, expected the license to get -- we are expecting the license in Q4 itself. So once that license is there, then we can sell any amount on the exchanges also. Currently, we are selling it at MCX. And in future, we would have LME exchanges also as our market. But that said, it gives you lesser volumes. I mean, lesser realization sell to exchanges rather than sell directly to the OEMs. So we prefer to sell it to the OEMs. And if there is any pressure in the future, then LME exchanges are there for you to sell to.

[indiscernible].

No, no, no. In the near future, we don't see any pressures at all. Whatever we are producing, there is enough market available both in India as well as overseas, which can take our products.

Our next question comes from the line of Amay Sharda from Purnartha Investment Advisors.

I just had 2 questions. First was, what was the percentage of revenues from Exide Industries in the last quarter?

So Exide is a very small portion we do because we have just started with Exide. But going forward, we are working both models supplying directly to Exide also, and we are taking some scraps also like we do with Amara Raja. So the volumes will grow significantly in the next upcoming year.

But currently, it is like lower single-digit kind of numbers, right?

It's not in the top 10 customers of Gravita currently.

And it continues to be -- and it will grow going forward.

Yes, it is going [indiscernible] Sir, again, as I mentioned that we would -- so the overall requirement of lead is more than what we produce. So we will keep on selling to the customers where we get the highest realization. So for us, currently, there are better opportunities if we get better opportunity from Exide or when we grow our volumes more than what we can currently serve, then in those cases, we may look at other OEMs also in future.

Our next question comes from the line of [ Gaurav Shah ] from [indiscernible] Capital.

My question was more on the volume. So while we see that the volume is remaining stagnant over the last few quarters between 50,000 tonnes and 55,000 tonnes, and we are increasing capacity in terms of volume. How do we calculate the capacity utilization at 90%?

So the volume is constant because the capacity increase has not taken place in India. And that is why we are running it at an optimal capacity of 90%. Generally, the -- sorry, the optimal capacity is even less than that. But because there is enough scrap available and enough demand from the customers, we're currently running it at 90% of capacities in India. And we are increasing the capacity so that -- because we have scrap availability and we can manufacture those products, but we will add the capacity. So once the capacity is there, we can use it further to make more products in future.

So can I understand that the overseas capacity is not getting fully utilized for now?

So overseas capacities, we generally keep a higher capacity in overseas locations because scrap availability is not continuous. And in our case, the capacity is not a constraint -- should not be a constraint because it's -- the CapEx to revenue is around 8 to 10x. So we generally keep a higher capacity in overseas locations, keeping in mind that we can get higher scrap also in future. And currently, if you look at our overseas capacity utilization, it is at around 65%. So basically, the overseas capacity is because we are not able to import in those countries. So it is mostly dependent on the local scrap. So in India, as compared to other countries, India, we can import the scrap. So that is the reason we are increasing the capacity in India. We can import overseas also, we can take domestic also. So that is the reason India is looking more volumes. And also, as we mentioned earlier that we are importing some of our scraps from overseas locations into India because there is a better arbitrage opportunities. So in that case, also some of the overseas capacities remain unutilized.

Our next question comes from the line of Sumant Kumar from Motilal Oswal Financial Services Limited.

My first question is, any impact? And can you quantify the new labor law for us?

Currently, we don't see any impact. But definitely, the impact would come from the recalculation of gratuity and leave encashment for the labor. And we are expecting overall -- in future going forward, we expect an overall impact of around INR 4.2 crores going downwards. Sorry, this year, not in the next.

In this year, the total impact of this amount was approximately INR 4.2 crores, out of which INR 3.5 crores was pertaining to previous year and roughly INR 60 lakhs to INR 70 lakhs was pertaining to the 9 months.

This INR 4.2 crores you are talking about for annual, right?

For annual number. Yes, absolutely.

Okay. Okay. So the FY '27, we can see this kind of impact, correct?

Right. Right.

Okay. And then my next question is regarding aluminum, I have seen a significant decline, 50% decline and 5% growth in lead side. So what is happening in aluminum, why our growth is significantly down since volume growth?

So we mentioned earlier that there has been some increase in aluminum prices. And when such things happen, then the scrap dealers tend to withhold the scrap and don't sell it to the recyclers. And this caused a tightening of scrap availability, and that has led to lower volumes in the quarter. But going forward, we are expecting the normalcy to continue, and we will start getting more aluminum scrap going forward.

Okay. And that is why we have seen a margin expansion from INR 10 per kg to INR 14 per kg because of rising aluminum prices.

No, no, it's around the same, INR 14 per kg was -- even in last quarter, we had around INR 14 per kg. So this is the [indiscernible]

We are at INR 10.

INR 10 was in plastic, not in aluminum.

Okay. Sorry. Yes, it was INR 20. Yes.

These are specifically higher because of increasing aluminum prices last year because we imported a lot of material into India. And because of that, there was an increase in the overall profitability coming out of higher prices of aluminum.

Proximity in aluminum has gone down Y-o-Y.

Sorry?

Proximity in aluminum has gone down Y-o-Y.

Yes, sir.

Our next question comes from the line of Sumangal Nevatia from Kotak Securities.

Most of the questions are answered. I just want to know -- excuse me, if I missed, is it possible to give some volume guidance for FY '27, given that we have such significant capacity addition and a decent visibility on scrap. And I mean, if you look at last 4, 5 years now our volume CAGR, assuming a similar or some ramp-up in fourth quarter; for last 5 years, our CAGR of volume is around 16%, 17% now versus 25% guidance. So how fast we can catch up over the next 1 year to kind of get the CAGR back as per our long-term target? So I think guidance for '27 volumes across division would be very helpful.

So as we are mentioning that there may be some volatility in terms of this growth -- volume growth on a year-on-year basis. But overall, our target of 25% remains intact. And -- but more than that, we talk about 30% to 35% growth in the bottom line numbers. That is the EBITDA numbers or the PAT number because as I mentioned that sometimes although the volume that we've done is higher, but it does not reflect in the overall consolidated statement because some of the materials we move from Africa into India. So the overall top line numbers may vary, but you can expect the same kind of bottom line numbers of around 30% to 35% increase in EBITDA numbers in next year and then going forward also.

Okay. And sir, when do we start expecting contribution of external sales of rubber division from which quarter?

So as Sunil-ji mentioned, there was some contribution from rubber coming in last quarter also, but it was not significant. So it was not shown in the segment-wise numbers. But from next quarter onwards, we will start sharing the numbers for rubber also.

Understood. And sir, in the past, we've talked about...

I'm sorry to interrupt you sir, but please rejoin the queue.

Sure.

Our next question comes from the line of [ Neeta Deshpande ] from Mirae Asset Sharekhan.

Just would like to ask you, there are the global headwinds and the geopolitical issues which are going in the global front. So definitely, the commodity prices are very volatile. Like other than nonferrous metals, specifically we are seeing lead, aluminum, all that stuff. So any other kind of hedging that you have opted and how much would be the percentage? And what would be the impact on the overall margins? Can you please brief? And secondly, if you can -- any other plans for copper addition in the scrap, just like as you have mentioned, the rubber, paper, steel, lithium, they are going to get introduced. So by any chance the copper, zinc or nickel, the nonferrous segment?

Yes. So to answer your first question, as far as lead is concerned, we are totally hedged. So there will be no impact of these fluctuations on lead both in -- I mean, it may have impact on the top line, but there would be no impact on the bottom line because we go 100% hedged in lead. Aluminum, we are looking at some options to hedge. But currently, because we do ADC12, which is not traded on any of the exchanges, so we find it a little difficult to hedge, and that is why we've kept our volumes low in aluminum. We are not doing any aluminum recycling in India currently. But the moment that hedging mechanism is in place, we will start doing aluminum recycling also. So that will give us some growth in aluminum also going forward. And we are looking seriously on all recycling verticals, including solar panels, paper, steel and specifically copper also because of the recent ecosystem that is happening in copper and how the copper is behaving and the requirement of copper going forward. So we believe that in future, copper can also be one of the segments that Gravita would go into.

Our next question comes from the line of [ Devang Shah ] from Elvest Investment Managers Private Limited.

My first question that in this particular quarter, we came out with an overall operating margin improved by 200 bps to somewhere close to 12% as far as overall margin is concerned. So moving forward -- and this margin improvement due to better price realization or operational efficiency? That is first question. And secondly, moving forward, what kind of trajectory we can expect it will expand or continue to remain in this particular range?

So from a quarter-to-quarter, I mean, generally, it comes from better realization and not from improvement in operations because it takes time for operational improvement to take effect. But going forward, we believe that what we have said is that in lead, aluminum and plastic, we have given you per tonne EBITDA number that would remain there. And also some part of it has come because there have been some better opportunities in India, and that has impacted our top line. We have sacrificed some of the top line growth to get better EBITDA numbers also. But going forward, you can expect what we've already mentioned that around INR 19 to INR 20 in lead, around INR 14 to INR 15 in aluminum and plastic would give you around INR 10 to INR 12.

Okay. So we may continue a similar kind of trajectory in an optimism way, right?

Yes. But you can -- in future, in long term, you can definitely expect some additional benefit coming out of better operational efficiencies and better procurement network also and more value-added products going forward. But that would be more in a long-term basis. So by FY '28, you can expect probably INR 0.5 to INR 0.75 per kg per kg improvement in all the 3 segments.

Okay. And my second question, even as far as volume growth is concerned, because we -- in our presentation, we are aspiration to be at 25% kind of guidance as far as our overall reason is concerned, that has been highlighted. But somewhere we are stuck and in this quarter also, it's been reflected that overall Y-o-Y also, we have not been able to come out with a good volume. So moving forward, as far as FY '27 and '28, I don't want any number, but you can say somewhere close to your guidance or somewhere close to 20% kind of thing we can expect as far as total volume growth is concerned?

Yes, absolutely because part of this volume growth, as I mentioned, we sacrificed because to get higher profitability. But part of it was because the capacity expansion that we were planning to have in Q2 and Q3 did not happen. There were some delay. And these capacities are going to come in Q4 this year. So definitely going forward from Q1 onwards, you can see some improvement coming from lead. And in aluminum and plastic also, we -- because the capacities are there, we can expect some higher numbers. So definitely, there would be some improvement in terms of volumes coming in the next year.

Ladies and gentlemen, due to the time constraint, that was the last question for today. I would like to hand the conference over to management for the closing comments. Thank you, and over to you, sir.

Thank you, everyone, for participating in this call. We trust that we have addressed all your queries during the 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.

Thank you, sir. On behalf of Antique Stockbroking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect.