Baheti Recycling Industries (NSE:BAHETI) Q2 2027 Earnings Call

0:05 Good afternoon, everybody, and warm welcome to the h one f y twenty seven earnings conference call for Baheti Recycling Industries Limited. The company's financial results and investor presentation has been published on both NSE and the company website. Before we begin, please note that certain statements made during the call may be forward looking in nature and are subject to uncertainties. Actual results may differ materially from those expressed or implied on the call. Joining us today from the management, we have mister Yash Shah, joint managing director of the company, and mister Manu Shah, chief financial officer. We'll begin with the opening remarks from the management followed by followed by the interactive q and a with the participants. With this brief introduction, I would like to take the opportunity and hand over the call to mister Yash for opening remarks.

0:51 Over to you, sir. Good evening, everyone. Thank you for joining Baheti Recycling Industries Limited h one FY twenty seven earnings con call. I welcome all our shareholders, investors, and analysts, and thank you for your continued interest and confidence in our company. We have begun FY '27 on a very, very strong note, delivering healthy growth in both revenue and profitability. During the first half, our revenue grew by approximately 68 percentage year on year to $5.28 crores, while EBITDA nearly doubled to INR 42 crores and PAT increased by approximately 106 percentage to 19 crores. What is particularly encouraging is the improvement in quality of our earnings.

1:37 In the recycling business where metal prices can influence revenue and percentage margins, we have used EBITDA per ton as an important benchmark of operating performance. During h one FY twenty seven, our EBITDA per ton stood at approximately 32,000, reflecting a significant improvement over the previous financial year. Looking ahead, our strategy remains focused on three priorities. One is increasing volumes, another is improving value addition, and third is strengthening bottom line that is profitability. Our upcoming aluminum wire rod division is an important part of this strategy. We are expanding on our existing own land with a plan scale up to 25,000 tons. We also intend to reach peak utilization levels of our total capacity by the end of next financial year.

2:27 Giving the improving business visibility, we have also revised our FY twenty eight revenue guidance offered to over 1,300 odd crores. We are equally pleased to receive in principle approval for the migration to main board from both the exchanges that is NSC and BSC, making another important milestone in our corporate journey. On the operational front, we continue to focus on building a capital efficient manufacturing model. Our facilities operate entirely on electric furnace and TRF without conventional grid furnaces, which which we were using earlier. This approach supports operational efficiency while allowing us to expand capacity with disciplined capital investment.

3:15 We intend to continuously enhance our manufacturing capacity to meet growing demand while also increasing the contribution of value added products to our overall product mix. At the same time, cost optimization remains a three... Key priority. Our recently commissioned 1.56 megawatt captive solar plant is expected to generate annual savings of around 1.8 groups, helping us reduce energy cost. And most importantly, it will help us in carbon emissions. Our focus is not merely on increasing volumes, but on building a more efficient, diversified, and profitable recycling business with higher value addition and better earnings per share.

4:03 We remain confident about the opportunities in India's aluminum recycling industry and will continue to focus on profitable growth, efficient capital allocation, and long term value creation for all our stakeholders. With that, I would like to hand over the call to our CFO to take you through the financial performance in greater detail. Thank you, everyone. Thank you, sir. Good evening to everyone. I will briefly take you through the financial performance of the Baheti Recycling Industries for the half year ended 09/30/2026. During the half year one, financial year '27, revenue from the operations stood at $5.28.47 crore compared to $3.01 5.14 crore in f one financial year '26, registered a year on year growth of 67.69%.

4:54 EBITDA increased by 99.48% to 42.37 crores compared to 21.24 crores in the corresponding period of last year. Our EBITDA margin improved to approx... Approximately 8.02 compared to 6.74 percentage in the half one financial year twenty twenty six, representing an expansion of approximately one twenty eight basis points. During the first half, our total production stood at 13,081 metric tons, translating into the EBITDA per metric ton approximately 32,400 rupees compared to approximately $26,536 per metric ton in the previous financial year '26.

5:45 This improvement reflects our focus on operational efficiency, cost optimization, and improving profitability pattern. Profit before tax grew by 114% to 25.71 crores, while profit after tax increased by 105 percentage... More than 105 percentage to 19.08 compared to 9.27 crores in the same same period of the last year. Our paid margin expanded from 2.94% to 3.61%, improvement of approximately 67 basis points. Diluted earnings per share stood at 18.26 compared to 8.94 in the corresponding previous year period.

6:36 As we move into the second half of financial '27, our financial priorities remain entered on maintaining the healthy profitability, optimizing working capital, supporting our upcoming capacity expansion through the disciplined capital allocation. With that, we can now open the floor for questions. Thank you. Thank you to all of you. Thank you, mister Yash. Thank you, mister Manoj, for giving a brief intro on h one f y twenty seven highlights. We will now open the floor for q and a session. Participants who wish to ask a question are requested to use the raise hand feature on Zoom. We will invite participants to unmute themselves and ask the questions one by one. Kindly introduce yourself and your organization before asking your question. We may now begin with the q and a session.

7:30 We'll take the first question from mister Ayush Jubedi. Hi,. Hi,. Thank you so much for taking my question. So so I just wanted to, you know, put some emphasis on why... Which all reasons that we have increased our guidance. You know, we have increased our guidance from 1,100 to 1,300 crores. So you can just highlight some reasons for that. There are multiple reasons, but one of the biggest reason is that we have received an approval from the... Many of the OEMs. So we are more than hopeful, and what we are forecasting the orders from OEMs have made us realize that the figure of 1,100 crores would be achieved in this financial year.

8:17 And that is why, accordingly, we have revised our next financial year to 1,300 odd crores looking to the the onboarding of the OEMs. Okay. And, sir, I also saw in your presentation, you know, that expected utilization levels that we are looking at is around 80%. Are we on track to achieve those levels? This this year, we are targeting to close somewhere around 75 percentage on 40,800 tons. And next year, we are targeting somewhere close to 80 to 85 percentage. Yes. We are on... Completely on track. Okay. Okay. And, sir, I just wanted to ask about the wire rod facility that, you know, we are we are coming up with.

9:02 So is it... Sorry. I am new to the company, but is it is it something that, you know, will be a value add, will have higher margins? And I see there are many players entering this segment. So how how do we... Yeah. Yeah. Earlier, it was completely dominated by the primary players like Hindalco, Nalco, Balco. As wire rod was by... The wire and cable manufacturer was buying wire rod only from this kind of companies, the primary wire rods. Those secondary wire rods, because of the EPN norms and everything, the secondary wire rod has come into place and many people will start buying secondary wire rod without deviating their tensile strength of the... Or the conductivity of the wire without deteriorating that. So that is why secondary wire rod has found its place.

9:54 And going forward, you'll see this... The cable manufacturer will buy more of secondary aluminum wire. Okay. And, sir, just just wanted an industry perspective on, you know, how how the government policies are shaping up. You know? I met some of the players in the industry, and, you know, they have been emphasizing that government support has been very high, and there are very regulatory actions that I have taken to support the industry. So you... If you can just share some industry level of policy highlights if some... Something has come up or something like that. See, See, government is coming up with APR. Government focusing on circular economy. So they are they are treating aluminum or any metal for... In case this, I think, is the is the next big thing in the...

10:50 By looking to the perspective of government, they want more and more recycling to be happened in India. Regarding aluminum. We have the best... We have the hands of the best of the people from the government that will help us to develop some product to to help us in recent development. Okay. Okay. So just my last questions, and then I'll get back in the queue. So so, you know, our cash flow from operations have been negative. So, you know, our working capital requirements have been quite high, and we have increased our inventory also.

11:40 So, you know, how how are we looking to manage manage that going ahead as we scale up our new facilities come in, we grow. Yeah. So the... If you compare cash flow from previous financial, it is getting better day by day as we are maintaining the inventory... The days of inventory has reduced. The cash flow adds... No doubt it is negative, but over the period of two to three years, the cash flow will also get positive because we are we are getting many OEMs on board. So we have to keep an additional stock for them just to get through that. That was a blessing in this guy's orders in the month of March, April when the situation was not that good. The geopolitical region was not that good. So in terms of looking to care... To get OEMs on board, it takes usually two years. So because of that, we were having inventory. So because of that reason, we were able to get OEMs on board immediately.

12:42 So particularly for us, the situation... The geopolitical situation was a blessing in disguise. And now we we are in the systems of... Now we know, okay. We we want that kind of in the... We that... We want that kind of stock only for the job. We want that kind of stock for DBS. We want that kind of stock for oil and fuel. So we'll we'll... Eventually, in a year or two, when they'll be holding the chunk in the OEMs in the OEM industry, then particularly our inventory will come down. If the inventory will come down eventually, operating cash flow will become positive. But we are on track. We are on track. We are on track on that. Okay. So that's that's really great to hear. And just just wanted to congratulate to you on, you know, in the approval for NSC BSC main board. Congrats to the whole management entity. Thank you so much. Thank you, Sundar. Thank you. We'll take the next question from Jia Sulanki.

13:49 Have one question. Gia, you're not audible. Hello? Am I audible now? Yes. Perfect. Yes. I had one question. I can see that your debtor days and all, they're all improving. However, your cash conversion cycle has been deteriorating over the period. It's increasing over each year. So what's the main reason behind this? Can you repeat the... Questions again? Okay. So I can see that your cash conversion conversion cycle, it is increasing year by year. So what is the main reason behind this? Actually, main reason of increasing the working capital cycle is the increasing in the inventory as well as the data.

14:41 So in our industry, the... Once the... One cycle of the data is when we are introducing the new clientele. So first cycle will be remained the constantly engaged into the... Into them for the routine... Getting the regular routine orders. Okay. It is... Eventually, I'll tell you, Jia. The... If you'll see... If you'll compare it with the next... Previous financial, the cash conversion cycle is all... Also got improved. So eventually, in... Down the line, in couple of years, you will see everything will come into place as inventory inventory days, it has reduced. So if inventory days will reduce, ultimately, the operating cash flow will become positive as operating cash flow will become... Or it is a entire chain.

15:31 So we are working on it and, ultimately, in one or two years, I mean, maximum two years, you will see that it will get in a reasonable days. Okay. No. Because I was seeing that your inventory days and cash conversion cycle... The inventory days, that's quite reduced. Okay. Other thing, with the increasing of the top line with the same inventory, will be going to be improving to the next couple of years. Okay. Yes. That's all from my end. Thank you. Yes. Thank you. We'll take the next question from Harsh Patel. Good evening, Yash, and congratulation on a fabulous set of numbers.

16:21 Just one key question. Actually, couple of key questions from our end. One is the EBITDA button which you mentioned has increased to around 32,000 odd this year compared to around 26,500 odd last year, which is decent around 20, 25% jump. So how much of this is going to be sustainable is what we would like to... See, any any... That is... I've I've been repeating this answer on every phone call. Any EBITDA margin between seven to 10% is sustainable. So we we will be in that range, seven percentage of bare minimum EBITDA to 10 percentage. If you'll see that maybe quarterly quarterly, it will lag. Why? Because our formula is such that it is on a m minus one formula basis, month minus one formula basis.

17:13 So some... Somewhere it will come on an inventory gain. Sometimes it will come it will come down from 9% to 7% because of the inventory. So anywhere between seven to 10% is sustainable EBITDA margin. Fine. And one other question that, you know, keeps popping up is the how are we doing our... I mean, have we thought about realigning our sourcing requirements considering that a lot of the... I mean, the bulk of the sourcing comes from Europe. So, I mean, there are some talks about, you know, restrictions being imposed by Europe to... Export of scrap and all that. So how does that, you know, affect us going ahead?

18:01 So that bulk is been coming from UK. Majorly, it is coming from UK. And for every region, we have different kind of sourcing. Europe, it is going on since two years. It was earlier was... It was in May. Now it has been extended to December. So we are not that much on dependent on Europe at all. We have our holding USA, South America, UK, Australia, New Zealand. So I don't think so there will be any problem in terms of sourcing. How much how much of the proportion would be from Europe? If you can share that. 12 to 15% of the proportionate is is from Europe. Fine.

18:46 That's all. Thanks a lot. Thank you so much. Thank you. We'll take the next question from. Hello,. Hi, Am I audible? Hi. Good afternoon. Congratulations. Good set of numbers and conversation on, you know, you know, getting an interest for approval for, you know, moving to main board. Thank you, sir. Yeah. So I had a couple of questions. So first of all, since I'm new to the company, can you explain a bit about how... What what exactly are we doing in aerospace segment? So we we are making aluminum alloy, which is being used in aerospace segment by by the die castors. We're making a part of... Who is making the part for aerospace.

19:38 So that is how we like to put forward in the aerospace department to the many of to the... To many of the companies. So we are developing on that part, the aerospace ISO. Okay. So have we started the... Yeah. We have started. We have given the trial lot to one of the one of the client also. Can you maybe explain it more more in detail in a bit simpler... Simplified way? Sorry? Can you explain this in a bit simple See. In aerospace, there is there is a requirement for aluminum.

20:23 So we are making aluminum alloying guards, which is being used to make that part. That part is being built by one of our die casters. So we have given the trial lot to our die caster. Okay. So when it is approved by the... By Boeing or any of the aerospace arrow... Airplane manufacturer, so then we can get that certificate and then we can proudly say that our material is going and it has been passed and it is going in the aerospace industry. Understood. So another question is, what are our hedging strategy? You know? Our our our purchasing... Our purchasing is completely based on percentage of LME depending upon the scrap quality and and the scrap what we are buying, it is on the percentage of LME and our sales is on. Again, our sales is on LME basis, LME into dollar, month minus one factor.

21:26 So average LME of October into every dollar of October plus delta, what we are working on, would be applicable for November. So the... It will be a month lag, but over the period, over twelve months, if you'll see, then we are naturally hedge our purchases, naturally hedge and backed by our sales. It is it is a price variation clause whether it will escalate it it will escalate, whether it will de escalate it will de escalate it. Understood. And, you know, one more question. In one of your meetings, you have mentioned about the aluminum billets as well. Something which CMR Green is doing at this moment. Any light on this thing, sir? Sorry. Sorry. Sorry, sir.

22:13 So in one of your meetings, you mentioned that, you know, about aluminum billers as well. Currently, you know, CMR Green is doing at this moment. So in light of this... So we are coming up with aluminum wire rod project, which is more profitable or business. So we'll be coming up with wire rod in the month of January. And after that, we'll we'll... That is in pipeline, but we have shifted to wire rod first. Okay. That's it from my side as of now. I have couple of questions, but I'll join back the queue. Thank you. Thank you. We'll take the next question from Priyansh meeting. Hi,. Thank you. Sir, hope I'm audible.

23:02 Yes, please. Yep. Sir, great set of number. It... Great following you for, almost one and a half year now. Quarter after quarter, your numbers are my influencer. Yeah. Sir, just a few quick question. So this electric furnaces that we have also mentioned, right, that will go live on fourth quarter, so that is also accounted in our Electric furnace have gone live. Electric furnace have gone live. Okay. So that is why the utilization is less in this h one because of the electric electric furnace quantity has already been installed, and it has been added to the total quantity. Okay. So understanding wise then, capacity should already be doubled. Right? Or is it the It is the is 40,800 tons.

23:51 With 12,500 tons capacity will be added by the end of q four for aluminum wire rod. Yeah. Okay, sir. Sir, any update on any... Are we also... Now because as we grow in our size, so are we also looking to any secured large orders from any of fabricator, be it, like, value added in terms of aerospace or any other client, which will take up... For aerospace, we have just sent a sample. If the trial all... If all things will be into place, then we'll get that approved, and we'll get that aerospace ISO also. Okay. So volume wise, sir, which industry apart from aerospace?

24:38 See, you looking to... We are we are associated with the steel plants. We are associated with the automobile industry, the electrical component industry, the transmission industry, the piston industry. And we are associated with... The wire rod will come into place, then we'll be associated with the cable and conductor manufacturers. So there is huge number of industry where we are associated with. As aluminum is the most versatile metal, it can be used anywhere. So the wide range of aluminum... The use of wide range of aluminum help us to diversify our products into many industries. Okay, sir. Not yet any big customer. We have a panel. Right? That that will be the last question, sir.

25:27 We see we are associate... In Chile plans, we are associated with our solar, metal, Tata Steel. In automobile, we are associated with Bajaj, TVS, Royal Enfield, and and their die casters like Minda, AST Automotive, Endurance Technologies, CI Automotive, Ashley Holdings, mother son, Minda Industries, Shiram Piston. In electrical appliances, we are associate... We are associated with Siemens, Philips, and their die cast are again, Sigma Electrical, Escocasting, Umal numeriences, and so on. In transmission industry, we are associated with International Transmission Limited. Most of our... It is a Canadian company. Most of our India Private Limited.

26:12 In piston industry, we are associated with Sridam Piston, India Piston Limited, Federal Mogul, and so on. Yeah. Thank you, sir. That gave us a good understanding. Yeah. Thank you. Thank you so much. Thank you. Thank you. Any participant who wishes to ask a question, please use the raise hand feature available on the Zoom dashboard. We'll wait for a minute to see if, we have further questions from our participants. We'll take the next question from.

27:01 Yeah. Thank you for the opportunity. Congratulations on a good set of numbers and on the NSE BSC main board migration. I have one question regarding the receiver. The receiver had increased to $1.35.88 crores. What is the data aging, and have there been any significant overdue balances or extended credit arrangements? I'll I'll like CFO to answer this question. Manaj, well Yes. 135% of the address is due to the increasing of the... Added of the new clientele. And top line growth already... I stated earlier, that the... Every new clientele, the... One of the cycle is... Every time is held with the clientele as the... Getting the regular routine order from them. So data is increasing at the level of one thirty five gurus.

28:01 Okay. And our borrowings have also increased to $3,310 crores approximately. So what is the actual... I mean, do we... For the further expansion, are we planning to take further debt? Or this is enough for that moment? How much... What is the guidance for debt going forward to this year and next year? No. No. As such, we have no plan to be increasing any more debt. With the same debt level, we are trying to be achieving a good growth as as in this financial as we received the top line of $5.28 crores. And as stated by our joint MD that we are hoping to getting order... Revenue top line of the revenue more than thousand crores. And ongoing years, we are hoping for the 1,300 crores. So we are... With the same debt and with the same inventory, we are trying to be getting the same top line. So, ultimately, the old ratios and inventory days and working capital cycle going to be improved.

29:03 Okay. Fine. Thank you. I'll get back in the queue. Thank you. Thank you. We'll dig in next question from. Hi. Congratulation on good sets of numbers. So just wanted to understand where does this... Where does the order book stands as of now? And See, for next next half year, the h two, we have an order in end of around 300 odd crores. 300 odd crores, and this will be executed in h two of FY twenty seven. Correct. Okay. Thank you. Thank you so much.

29:50 Thank you. We'll take a follow-up question from. So thanks thanks again for giving me the opportunity. So, you know, I I was doing your industry tailwind slide from the presentation. You have mentioned about the European Union low carbon low carbon market. So, you know, there have been various regulations in the Europe around carbon mechanism. So, you know, what role are we going to play in it? If you can just emphasize Yeah. So for... Regarding the carbon emissions, we are we are a reactive company, not... We are a proactive sub company, sorry, other than reactive company because of one of our client. I'll I'll not like to name that client. It is a... I mean, 100% EOU company, headquarter based in USA. So we are we are maintaining that carbon emission according to according to The US standard, which is much more stricter than the Euro C band, which is being implemented by the European unions.

30:51 So we are maintaining that carbon emission data since 2020. So we are well aligned according to The US standards. So according to the European Union standard, we are more than well aligned. So we are having that kind of advantage. So that is why this carbon emissions and going forward this, the idea of certificate and the ISO and everything will get expensive and it it... To maintain that kind of certificate, it is much more... The cost of that is expensive. So going forward, I'm looking this kind of recycling industry. The industry, as of now, is much more fragmented.

31:37 Going forward, the industry would be consolidated going forward because this kind of cost and everything cannot be handled by small companies and a small... Or the small manufacturing companies. So it will be much more like pharmaceutical company. It will be much more consolidated in few hands. Okay. Okay, sir. Got it. And thank thank you so much, Bharat. Thank you so much. Thank you. Any participant who wishes to ask a question can use the raise hand feature available on the Zoom dashboard. We'll wait for a couple of seconds to see if we have, any further questions. Yeah. In the meanwhile, Nava, you can go ahead and ask your follow-up question.

32:29 Hello. Am I audible? Yeah. Yeah. Yes. So just last question. Thank you for giving the opportunity of asking again. So, you know, have you thought about, you know, expanding our portfolio apart from aluminum, you know, venturing into other metals like copper, iron, or other... Any other metal? So as of now, we are focusing on aluminum diversification in aluminum because aluminum has... As I told, government has focused particularly more on aluminum. And aluminum has that versatility, more margin, better margins, you can say better utilization. So as of now, aluminum wire rod, we are focusing on aluminum wire rod, then we are focusing on aluminum billet.

33:17 So we we have good couple of years with us in aluminum. Simultaneously, we'll develop something if interesting comes up and all. Okay, sir. That's it from my side. Thank you very much for answering the meeting. Thank you so much. Since there are no further questions, mister Yes, we can go ahead and put out our closing remarks for the call. So thank you everyone for your participation and, q and a... Thoughtful q and a. We believe Baheti Recycling is entering an important phase of its growth journey. With our existing recycling operation providing a strong foundation, our focus is now on scaling volumes, expanding into value added products, and improving profitability per ton. Our upcoming capacity addition together with the growing demand for recycled aluminum, as I've said earlier, provide us with a mini... Meaningful opportunity to strengthen our position in the industry.

34:21 We remain committed to executing our plan responsibly, maintaining financial discipline, and creating sustainable value for all our stakeholders. Thank you once again for your continued trust and support. We look we look forward to interacting with you in the coming quarters. Thank you. On the behalf of Baheti Recycling Industries and Merlin Capital, we thank all participants for joining us today and for their continued interest in the company. As we conclude, we wish everyone a very happy Diwali in advance and a prosperous year ahead. Thank you once again. We look forward to connecting with you in the upcoming quarters. With that, we conclude the call. Happy Diwali, everyone. Bye. Thank you. Thank you to all of you.