Shares of Gravita India, a leading player in lead and aluminum recycling, surged 7% on December 17 following the announcement of a Qualified Institutional Placement (QIP) to raise funds of up to Rs 1,000 crore. The move has sparked investor interest, and the company’s stock is seeing positive momentum due to the expected financial benefits from this capital raise.
Details of the QIP and Fundraising Plans
Gravita India’s QIP will initially aim to raise Rs 750 crore, with the option to upsize the issue to Rs 1,000 crore. The fundraise will lead to an equity dilution of approximately 5.2 percent. This means that the company will issue new shares to institutional investors, resulting in a slight increase in the total share count but with the potential for significant capital inflow to fuel its growth initiatives.
The floor price for the QIP has been set at Rs 2,206.49 per share, reflecting a 1.5 percent discount to the previous session’s closing price. Additionally, the indicative price is pegged at Rs 2,096.2, offering a 5 percent discount to the floor price. This pricing strategy is designed to attract institutional investors while providing Gravita India with the much-needed capital to pursue its expansion and debt reduction plans.
How the Funds Will Be Utilized
The funds raised through the QIP will serve a variety of purposes, aimed at strengthening the company’s financial position and accelerating growth. Some key areas where the capital will be deployed include:
- Repaying outstanding borrowings: This will reduce the company’s debt burden and help improve its balance sheet.
- Meeting working capital requirements: Ensuring smooth operations and addressing day-to-day funding needs.
- Additional capital expenditure (Capex): Gravita India has ambitious plans for expansion, particularly in new recycling verticals like lithium-ion battery recycling and rubber recycling.
- Mergers and Acquisitions (M&A) opportunities: The company is actively exploring global M&A opportunities, aiming to bolster its presence in the recycling industry.
In an earlier statement to analysts, Yogesh Malhotra, CEO of Gravita India, highlighted the company’s focus on strategic acquisitions and its readiness to act on M&A opportunities as they arise.
Strong Growth Trajectory and Expansion Plans
Gravita India is on an ambitious growth trajectory, with several projects in the pipeline aimed at expanding its capacity and diversifying its business. Notably, the company is in the process of setting up a pilot project for lithium-ion battery recycling, a sector that holds immense potential due to the rise in electric vehicles and renewable energy storage solutions. Additionally, it is working on its first rubber recycling plant in Mundra.
The company’s long-term growth strategy includes increasing its overall capacity to over 5 lakh metric tonnes per annum by FY27, supported by Rs 600 crore in investments. These investments will be directed not only to expand existing operations but also to explore new business verticals such as lithium-ion, rubber, and steel recycling.
Financials and Market Position
As of now, Gravita India boasts a market capitalization of ₹15,492 crore with shares trading at around ₹2,250. Here are some key financial metrics for investors to consider:
- Stock P/E: 57.7
- Book Value: ₹134
- Dividend Yield: 0.23%
- ROCE (Return on Capital Employed): 27.9%
- ROE (Return on Equity): 33.7%
- Face Value: ₹2.00
These metrics indicate a healthy and profitable company with strong returns on equity and capital employed, making it an attractive option for long-term investors.
Why Gravita India’s QIP is a Positive Move for Investors
The launch of the QIP is a strategic move that positions Gravita India for sustainable growth. With a focus on debt reduction, expansion into new recycling verticals, and potential M&A opportunities, the company is preparing itself for a strong future in the renewable energy and recycling sectors.
The 7% jump in shares reflects positive investor sentiment, as many view this QIP as a key step toward unlocking value and capitalizing on the growing demand for sustainable and green solutions. Moreover, the planned investments and expansion into lithium-ion and rubber recycling are likely to enhance the company’s revenue potential in the coming years.
For investors, the company’s strong financials, commitment to sustainability, and robust growth strategy make Gravita India an interesting stock to watch in the medium to long term.
Conclusion: A Step Towards Growth and Value Creation
Gravita India’s decision to raise up to Rs 1,000 crore through a QIP is a pivotal moment for the company, signaling its intent to accelerate growth, reduce debt, and capitalize on emerging opportunities in the recycling and renewable energy sectors. The 7% surge in shares reflects the positive reception from investors, and the strategic use of these funds could position the company for a prosperous future. With its ongoing expansion and strong financial performance, Gravita India is poised to be a key player in the global recycling market.
