Gravita India’s bold European move sends shares soaring—what this means for investors

Shares of Gravita India Limited jumped 9% to Rs 2,538 on 13 September 2024, following an announcement of a major expansion into Europe. The surge in trading volume came after Gravita revealed plans to acquire its first recycling plant in Romania through its subsidiary, Gravita Netherlands BV. This strategic move is part of Gravita’s effort to diversify its global footprint in the recycling industry.

Gravita India expands into european market with major acquisition

Gravita India Limited, a key player in the global recycling industry, is making its European debut by acquiring a waste tyre recycling facility in Romania. This acquisition will be carried out through a newly formed Special Purpose Vehicle (SPV) in Romania, in which Gravita Netherlands BV will hold an 80% equity stake, while local Romanian partners will retain the remaining 20%. The total cost of this acquisition is expected to be Rs 40 crore, with Gravita contributing Rs 32 crore. The company stated that this investment is subject to thorough financial, environmental, and legal due diligence.

Gravita’s expansion aligns with its broader vision to diversify geographically and enter new recycling verticals. The company already operates recycling plants in countries such as Senegal, Togo, Ghana, and Tanzania and aims to replicate its business model in Europe. The Romanian plant will have a capacity of 17,000 metric tonnes per annum (MTPA), allowing Gravita to serve a broader customer base and strengthen its competitive positioning in Europe.

Market impact and future growth strategies

The market reacted positively to Gravita’s European venture, with its shares climbing 9%. Over the past three months, Gravita’s stock has risen by 117%, underscoring investor confidence in its growth strategy. Analysts at Motilal Oswal Financial Services recently initiated coverage on Gravita India with a ‘Buy’ rating and a target price of Rs 2,350 per share, citing the company’s robust fundamentals and favourable positioning in a growing recycling market.

Gravita India has articulated its growth strategy through “Vision 2028,” which includes diversifying into high-growth sectors such as lithium-ion, steel, and paper recycling. The company aims for a revenue CAGR of more than 25% and profit growth exceeding 35% over the next several years. The rising demand for recycled materials in industries like electric vehicles and energy storage systems is expected to support this growth.

Industry perspective: a calculated move into a growing market

Industry experts view Gravita India’s European acquisition as a strategic decision that aligns with global trends towards sustainability and recycling. Market analysts highlight that Gravita’s entry into Europe could open doors to other markets, thereby enhancing its global footprint. Gravita India is positioning itself to take advantage of the growing recycling demand, especially in Europe, where regulations are increasingly favouring sustainability.

Gravita’s move into Europe reflects its ambition to leverage its competitive advantages, including its strategically located manufacturing units, deep procurement network, and lower production costs. The company’s focus on recycling metals like lead, which retains its quality even after multiple cycles, further positions it for sustained growth.

Competitive edge and strategic outlook

Gravita India is poised to gain a significant competitive edge in the global recycling market with its expansion into Europe. The company’s robust portfolio, coupled with favourable regulatory environments, places it in a strong position to benefit from the rising demand for sustainable recycling solutions. With an increasing push towards environmental sustainability in Europe, Gravita’s strategic entry into the region is expected to bolster its market position and drive future growth.