By Shares of Gravita India, a prominent lead producer, have been on an impressive upward trajectory, delivering substantial returns to investors. The stock, which stood at ₹977 per share just four months ago, has surged by an astounding 170%, reaching ₹2,585.
Over the past three years, the stock has skyrocketed by 1220%, establishing itself as a leading wealth creator on Dalal Street.
The remarkable rise in Gravita India’s stock price has drawn attention from domestic brokerage ICICI Securities, which believes there is still significant upside potential. The brokerage cites several factors contributing to the company’s future growth.
Among these are regulatory tailwinds that are expected to increase the availability of scrap in the domestic market, planned expansion into Europe, and a growing focus on recycled materials across various sectors.
ICICI Securities has updated its valuation method for Gravita India, shifting from a price-to-earnings ratio to a discounted cash flow (DCF) model to better capture the company’s growth potential. This adjustment has led the brokerage to raise its target price for the stock to ₹3,265 per share, up from the previous target of ₹1,750. This new target price suggests a 28% upside from the stock’s last closing price of ₹2,558.
Founded in 1992 in Jaipur, Gravita India specializes in the recycling of lead, aluminium, plastics, and rubber. The company serves a global clientele, with over 375 customers across 38 countries, including Asia, the Middle East, Europe, and the Americas. Domestically, Gravita caters to more than 230 customers across 22 states.
One of the key drivers behind Gravita India’s recent success is the favorable regulatory environment. The Central Pollution Control Board (CPCB) has introduced Environmental Compensation (EC) guidelines under the Battery Waste Management Rules 2022, which are expected to enhance scrap collection networks and support recyclers.
The introduction of a reverse charge mechanism (RCM) and a 2% tax deduction at source (TDS) on metal scrap is anticipated to benefit organized recyclers like Gravita by improving procurement conditions and shifting focus from the unorganized to the organized sector.
In a significant strategic move, Gravita’s subsidiary, Gravita Netherlands BV (GNBV), has signed a memorandum of understanding (MoU) to acquire the fixed assets of Access Auto Trading SRL (AAT), a waste tyre recycling plant in Romania.
This acquisition marks Gravita’s entry into the European market and represents a substantial investment of ₹320 million for an 80% economic interest, subject to due diligence. The acquisition is expected to broaden Gravita’s presence in the recycled rubber market and diversify its operations.
ICICI Securities also highlights the growing momentum in the recycling sector. India is becoming a crucial hub for companies seeking recycled lead, with increasing regulatory requirements for the inclusion of recycled materials in products. This trend is driving Indian companies, including Gravita, to expand their recycling capacities to meet rising demand.
The company’s expansion efforts are complemented by recent developments in the environmental regulations. The Ministry of Environment, Forest, and Climate Change (MoEFCC) has approved new EC guidelines for waste tyre management, imposing penalties on non-compliant manufacturers.
These measures are expected to benefit companies like Gravita, which have established strong sourcing networks and multi-plant operations, enabling them to achieve better margins compared to competitors.
