Baheti Recycling Industries Ltd Management Discussions

FY25 emerged as a watershed year for global economic recovery, marking a decisive transition from the turbulence of previous years to sustainable growth momentum. The global economy demonstrated remarkable resilience, achieving a robust GDP growth of approximately 2.9% despite persistent challenges from elevated interest rates across developed markets. This recovery was underpinned by resurgent consumer demand, technology-driven manufacturing acceleration, and a powerful rebound in emerging market economies. Commodity markets, while experiencing volatility, remained fundamentally strong due to supply constraints and resurgent demand in green infrastructure and electric mobility sectors.

India continued its trajectory as the worlds fastest-growing major economy, delivering an exceptional GDP growth of 7.2% in FY25. This outstanding performance was driven by multiple catalysts including surging domestic consumption, aggressive government-led infrastructure spending under the "Atmanirbhar Bharat" initiative, expansion of Production Linked Incentive (PLI) schemes, and unprecedented growth in the digital economy ecosystem. Indias strategic positioning as a preferred manufacturing hub for global corporations was further strengthened by improved ease of doing business rankings and comprehensive supply chain resilience.

The aluminium-consuming sectors experienced exceptional growth momentum during FY25. Automotive, electricals, renewable energy, and construction— collectively representing over 70% of aluminium demand—recorded healthy growth rates throughout the year. The governments unwavering commitment to decarbonization, clean energy transition, and sustainability initiatives created powerful tailwinds for circular economy businesses, particularly benefiting metal recycling enterprises like Baheti Recycling Industries.

Looking ahead, Indias macroeconomic fundamentals remain exceptionally strong, with consistent GST collections, improved credit flows, and robust industrial demand. The governments ambitious green hydrogen mission, accelerated electric vehicle adoption targets, and massive urban infrastructure expansion programs ensure sustained demand for recycled aluminium products, positioning companies like Baheti at the epicenter of this transformational growth story.

The global aluminium recycling industry is experiencing a paradigm shift, emerging as a cornerstone of the worldwide green transition. Aluminiums infinite recyclability, combined with its remarkable 95% energy savings compared to primary production, has established it as the material of choice across industries globally. The economic and ecological advantages are compelling, with recycled aluminium accounting for over 35% of total global supply in 2024, and projections indicating robust growth to 45% by 2030. The market is expanding at an impressive CAGR of 6.8%, driven by automotive lightweighting trends, EV proliferation, infrastructure modernization, and innovative packaging solutions.

Indias aluminium recycling sector has evolved into a critical component of the national metals ecosystem, representing one of the most promising growth opportunities in the organized industrial landscape. The country generates approximately 3.5 million tonnes of aluminium scrap annually, with organized recyclers currently processing only 40-45% of this enormous volume. This presents an extraordinary untapped opportunity for growth, formalization, and value creation. Progressive policy initiatives including the Extended Producer Responsibility (EPR) framework, industry-specific ESG mandates, and increased foreign participation are driving rapid sector transformation and creating a conducive environment for market leaders like Baheti.

Indias recycled aluminium market is projected to achieve a stellar CAGR of 8-10% between FY25 and FY30, significantly outpacing global averages. This exceptional growth trajectory is fueled by accelerating automotive sector demand for lightweight solutions, rapid EV adoption requiring advanced thermal management materials, the infrastructure boom requiring high-performance components, and expanding export opportunities to sustainability-focused global markets.

Baheti Recycling stands uniquely positioned to capitalize on these dynamic market forces. With over 29,160 MT of installed capacity and comprehensive certifications including ISO 9001, ISO 14001, ISO 45001. Our proven track record of serving marquee clients across steel, automotive, engineering, and electrical sectors, combined with our advanced furnace technology and process optimization capabilities, positions us at the forefront of this industry transformation.

The market expansion opportunities before Baheti Recycling Industries are unprecedented in scale and potential. The EV revolution represents a massive growth catalyst, as electric vehicle adoption accelerates globally and domestically, driving exponential demand for lightweight aluminium components essential for chassis construction, battery housings, and advanced thermal management systems. Our technical capabilities and quality certifications position us ideally to capture this high-growth segment.

The strategic opportunity to enter aerospace-grade alloying represents another transformational growth avenue. With our expanding capabilities and comprehensive quality certifications, and also application for Indian Automotive Task Force (IATF) which shall be received by June of 2025 and makes us well-positioned to serve these precision-demanding, high-margin sector. The global trend toward carbon-neutral supply chains creates substantial export growth opportunities, as international manufacturers increasingly seek certified, sustainable partners for their sourcing requirements.

Our ongoing brownfield expansion to 34,000 MT capacity by FY26 through advanced TRF installations will unlock significant operational leverage and enable us to capture increased market share. The strategic entry into zinc alloys and aluminium billets opens entirely new high-margin revenue streams, diversifying our product portfolio and reducing dependence on traditional recycling segments. Our successful penetration into European markets, including Hungary, Turkey, Germany, and the UK, combined with deeper South India presence, provides geographic diversification and access to premium market segments.

Thesustainability advantage wepossesscreatesmultiplemonetizationopportunities. Carbon credit programs offer the potential to monetize our substantial CO2 emission savings, while alignment with global OEM sustainability mandates establishes preferred supplier status. Our upcoming 1.2MW DC Solar PV Plant will reduce

OPERATIONAL PERFORMANCE EXCELLENCE

Baheti Recycling Industries achieved exceptional operational performance in FY25, demonstrating our capability to scale efficiently while maintaining quality excellence. Our total production of 18,160 MT comprised 11,576 MT of Aluminium Alloy Ingots and 7,034 MT of Aluminium Deox, reflecting our diversified product portfolio and market responsiveness. The current capacity utilization of 63.8% provides significant scalability for volume expansion, ensuring we can accommodate growing customer demand without immediate capital constraints.

Our technology and infrastructure development initiatives have positioned us at the forefront of industry innovation. The successful deployment of modern Tilting Rotary Furnaces has enhanced operational efficiency while delivering superior product quality. Progressive automation of melting and casting processes has improved productivity and consistency, while the implementation of integrated ERP systems enables real-time decision-making and operational optimization across all functions.

The companys systematic focus on efficiency enhancement has delivered measurable results across multiple dimensions. Fixed cost optimization through enhanced operational scale has improved our cost structure efficiency, while systematic asset productivity improvements have maximized utilization across production facilities. Our continuous improvement programs drive operational leverage and margin expansion, creating sustainable competitive advantages that compound over time.

FINANCIAL PERFORMANCE ANALYSIS

FY25 represented a landmark year in Baheti Recycling Industries financial journey, with recordbreaking performance across all key metrics. Our revenue achievement of ^524 crore represents robust 22.2% year-on-year growth, demonstrating our ability to capture market opportunities and convert operational excellence into financial results. The exceptional 5-year compound annual growth rate of 42.52% positions us among Indias fastest-growing industrial companies and validates our strategic approach to market development.

The transformation in our profitability profile has been particularly impressive, with EBITDA performance reaching ^40.6 crore and margins expanding dramatically to 7.75%. This margin expansion, more than doubling from 3.28% in FY21, reflects the powerful operating leverage inherent in our business model as we achieve scale. Our net profit achievement of ^18 crore represents substantial improvement in bottom-line performance, while strong return metrics on equity and capital employed demonstrate highly efficient capital utilization.

Our financial ratios analysis reveals a healthy and balanced financial structure. Liquidity metrics ensure operational flexibility and growth funding capability, while our balanced debt-equity structure supports expansion plans while maintaining financial stability. Working capital efficiency improvements in debtor and inventory turnover cycles enhance cash generation and reduce funding requirements.

The companys capital allocation strategy reflects our commitment to balanced stakeholder value creation. Strategic CapEx allocation focuses on capacity expansion and technology upgradation that drive long-term competitive advantages. Our maiden dividend declaration demonstrates confidence in sustainable cash generation while maintaining focus on growth investments. The emphasis on balance sheet strengthening ensures robust financial health to support our ambitious

HUMAN RESOURCES &

ORGANIZATIONAL DEVELOPMENT

Baheti Recycling Industries recognizes human capital as the cornerstone of our sustained competitive advantage and transformational growth. Our diverse workforce spans critical functions including metallurgy, production engineering, process R&D, marketing, finance, safety, and compliance, bringing together expertise that enables operational excellence and innovation. Structured training programs and comprehensive skill upgradation initiatives ensure continuous professional development, while clearly defined career advancement pathways across technical and managerial functions support talent retention and motivation.

Our organizational culture is built on the foundation of safety, discipline, and continuous improvement across all operational sites. The ISO 45001 certified safety management systems reflect our commitment to fostering a zero-harm workplace that goes beyond compliance to create an environment where every employee can perform at their best. Preventive risk management, routine safety audits, emergency response preparedness, and comprehensive training across all shifts ensure that safety excellence becomes integral to our operational DNA.

The companys "People First" approach ensures that every employee, from operator to leadership level, is empowered, well-informed, and aligned with Bahetis long-term mission and values. Increased women participation in our commercial and technical teams reflects our commitment to diversity and inclusion, while ongoing digitization of HR functions including performance management, learning modules, and employee engagement systems enhances transparency and organizational effectiveness.

As we evolve from a mid-sized enterprise to a global market player, our HR strategy is being comprehensively redesigned to attract world-class talent in emerging areas such as green metallurgy, process automation, ESG reporting, and digital analytics. This strategic talent acquisition, combined with leadership development programs and innovation culture initiatives, ensures we have the human capital foundation necessary to achieve our Vision 2028 objectives and maintain industry leadership.

SUSTAINABILITY & ESG LEADERSHIP

Baheti Recycling Industries has established itself as a sustainability leader in Indias industrial landscape, recognizing that environmental stewardship and business excellence are inseparable in todays global economy. Our environmental impact is both measurable and substantial, with every tonne of aluminium we recycle saving 95% of the energy required for primary production while preventing significant CO2 emissions. This environmental benefit, multiplied across our annual production volume, represents thousands of tonnes of emission reductions and conservation of critical natural resources.

Our commitment to renewable energy and carbon neutrality is exemplified by the upcoming 1.2MW DC Solar PV Plant, which will reduce our energy costs by 60% while delivering ^1.25 crore in annual savings. This investment demonstrates that sustainability initiatives create both environmental value and economic returns, reinforcing our integrated approach to responsible business practices.

Governance excellence remains fundamental to our operations, with robust corporate governance practices ensuring stakeholder confidence and long-term value creation. Our comprehensive risk assessment and mitigation frameworks, combined with proactive adherence to regulatory requirements and industry standards, establish Baheti as a trusted partner for customers, suppliers, and investors alike.

Social responsibility initiatives, including active CSR programs supporting education and social welfare, reflect our commitment to creating shared value for employees, customers, suppliers, and communities. Our industry leadership extends beyond financial performance to include contributions to sector development and best practice sharing, helping elevate standards across the aluminium recycling industry.

OUTLOOK

Baheti Recycling Industries has articulated an ambitious yet achievable Vision 2028 that positions the company for transformational growth and market leadership. Our revenue target of ^1,100 crore by FY28 represents more than doubling of our current scale, reflecting both the enormous market opportunities available and our confidence in executing strategic initiatives that drive sustainable growth.

The foundation of this growth strategy rests on systematic capacity expansion, with our ongoing scaling to 34,000 MT by FY26 through advanced TRF installations providing the operational capability to serve expanding customer demand. Market diversification through geographic expansion into South India and European markets, combined with strategic client partnerships, reduces concentration risk while accessing premium market segments with superior pricing power.

Product innovation and development initiatives center on value-added offerings

that command premium margins and serve specialized applications. Our strategic entry into zinc alloys and aluminium billets creates entirely new revenue streams, while our pursuit of aerospace sector certifications opens access to high-precision, high-margin applications. Customer-specific alloying capabilities further differentiate our offerings and strengthen customer relationships through tailored solutions.

Technology and sustainability leadership investments ensure we maintain competitive advantages while building capabilities for future market requirements. Comprehensive automation and digitization of manufacturing processes improve efficiency and quality while reducing dependency on manual operations. Continued investment in sustainable production technologies and renewable energy reinforces our environmental leadership while delivering operational cost advantages.

The alignment of macro tailwinds with our strategic capabilities creates an extraordinary convergence of opportunity. Indias continued

economic growth story, the accelerating EV revolution, and increasing sustainability imperatives across industries provide powerful demand drivers for our products and services. The vast untapped potential in Indias organized recycling sector, supported by progressive policy frameworks, creates market expansion opportunities that we are uniquely positioned to capture.

Our competitive advantages in technology leadership, quality certifications, and strategic client relationships provide sustainable differentiation in an evolving marketplace. The robust balance sheet and enhanced cash generation capability support aggressive expansion plans while maintaining financial flexibility for opportunistic investments and market developments.

The value creation promise we offer to stakeholders encompasses multiple dimensions of return and impact. Shareholders can expect superior financial returns through profitable growth trajectory and progressive dividend distribution policies. Market leadership establishment in key segments and geographic regions will create long-term competitive

moats and pricing power. Our contribution to Indias circular economy and environmental goals generates positive societal impact while building stakeholder trust and brand value.

Innovation excellence through pioneering next-generation recycling technologies and sustainable practices ensures we remain at the forefront of industry evolution while creating new value streams and market opportunities. With our proven track record, strategic clarity, operational excellence, and unwavering commitment to sustainability, Baheti Recycling Industries is not merely prepared for the future—we are actively architecting it.

The next phase of our journey promises unprecedented growth opportunities, market leadership consolidation, and stakeholder value creation in Indias dynamic aluminium recycling ecosystem. We are confident that our strategic positioning, operational capabilities, and commitment to excellence will deliver exceptional results as we transform from a successful regional player into a global champion of sustainable metal recycling.

RISK MANAGEMENT &

MITIGATION

Baheti Recycling Industries maintains a comprehensive risk management framework that proactively identifies, assesses, and mitigates potential challenges while positioning the company to capitalize on emerging opportunities. Supply chain security represents a critical focus area, with diversified sourcing strategies reducing dependency risks and ensuring consistent raw material availability across market cycles. Price risk management through hedging mechanisms and flexible pricing models protects margin stability while maintaining customer competitiveness.

Technology risk mitigation involves continuous investment in modern equipment and process upgrades, ensuring we maintain technological leadership and operational efficiency advantages. Regulatory compliance risk is managed through proactive monitoring of policy developments and adaptive strategies that ensure continued adherence to evolving requirements.

Financial risk controls encompass currency management through natural hedging strategies and selective use of financial instruments for forex exposure. Credit risk management through robust customer evaluation and comprehensive credit management systems protects cash flows and reduces bad debt exposure. Liquidity management optimization ensures adequate working capital and cash flow management to support operations and growth initiatives.

Operational excellence risk management includes comprehensive quality assurance systems that ensure consistent product standards and customer satisfaction. Safety management through our zero-harm workplace culture, supported by preventive safety measures and continuous training, protects our most valuable asset—our people. Business continuity planning and robust contingency frameworks ensure operational resilience across various scenarios.

INDIAS ALUMINUM RECYCLING BOOM CREATES MASSIVE OPPORTUNITIES

Indias secondary aluminum market is growing at 9-11% CAGR compared to just 1-2% for primary aluminum, creating unprecedented opportunities for recycling companies. With mandatory recycled content requirements starting in FY28 and the worlds largest infrastructure pipeline driving demand, aluminum recycling companies can capitalize on a perfect storm of regulatory support, technological advancement, and market demand. The sector presents a $160.47 million market in 2024 projected to grow at 12.6% CAGR - the highest among global markets.

The game-changing Extended Producer Responsibility (EPR)

framework effective April 1, 2025, mandates progressive recycling targets reaching 100% by 2028-29 for 18 aluminum product categories. This creates structural demand for recycling services through mandatory compliance.

Mandatory recycled content requirements begin in FY28 with 5% minimum recycled content, increasing to 10% by FY31 for all aluminum products. This regulatory framework guarantees long-term revenue streams through EPR certificate trading systems and compliance contracts with aluminum producers.

The Construction & Demolition Waste Rules targeting Indias 150 million tonnes of annual C&D waste (currently only 1% recycled) create additional guaranteed demand streams. With mandatory 25% recycling targets by 2028-29, this represents massive untapped potential worth billions in revenue.

Strategic advantage:

Companies can secure longterm contracts with aluminum producers needing EPR compliance, creating predictable revenue streams with government backing.

Indias automotive aluminum demand is growing 12-15%

annually, accelerated by the electric vehicle revolution and lightweighting mandates. The automotive recycling market is expanding from $8.24 billion (2023) to $13.17 billion by 2030 at 9.11% CAGR.

Electric vehicles require 65-80kg aluminum per vehicle compared to conventional vehicles, with aluminum content expected to reach 556 pounds per vehicle by 2030. BEVs average 644 pounds of aluminum, creating substantial end- of-life recovery opportunities.

The sector offers premium pricing for automotive-grade recycled aluminum meeting strict purity standards for safety-critical

applications. Vedanta Aluminum expanded Primary Foundry Alloy capacity by 120 KTPA specifically for automotive applications, indicating strong industry confidence.

Market dynamics: Every 1kg

aluminum used in EV manufacturing saves ~9kg CO2 emissions over vehicle lifetime, making recycled aluminum essential for OEM sustainability commitments.

Advanced sorting technologies using AI and LIBS (Laser-Induced Breakdown Spectroscopy) now achieve >95% purity Levels while processing 3-7 tons/hour. TOMRAs Dynamic LIBS technology distinguishes between aluminum alloys with precision, enabling premium product recovery from mixed scrap streams.

Deep learning applications in metals recycling produce high-purity fractions by removing cast aluminum from wrought fractions, creating smelter-ready materials with minimal manual labor. These technologies enable higher belt occupancy and faster processing speeds while maintaining quality standards.

Energy efficiency improvements through waste heat recovery systems capture up to 40 MW of extractable heat, achieving natural gas costs as low as 2.5 cents per pound of aluminum output. Recycling uses 95% less energy than primary production, providing significant cost advantages as energy prices rise.

Competitive positioning: Companies investing in advanced sorting and AI- driven processing can command premium pricing while reducing operating costs through automation and energy efficiency.

SUPPLY-DEMAND IMBALANCE CREATES MARKET OPPORTUNITY

Indias aluminum recycling rate of 30-35% significantly lags the global average of 65-75%, creating enormous improvement potential. With domestic aluminum demand growing 8-10% annually and per capita consumption at only 2.7kg (versus global average of 11kg), the gap represents massive growth runway.

India imports 1.83 million tonnes of aluminum scrap annually due to limited domestic generation, making it the worlds largest aluminum scrap importer. This import dependency at current 2.5% duty rates (industry seeks zero duties) creates opportunities for companies developing domestic collection networks.

Secondary aluminum demand growth of 9-11% CAGR vastly exceeds primary aluminum growth of 1-2%, indicating a fundamental market shift toward recycling. This trend accelerates as carbon regulations tighten and sustainability becomes mandatory rather than voluntary.

Strategic opportunity: Companies building domestic scrap collection capabilities can reduce import dependency while capturing higher margins from locally-sourced materials.

SUSTAINABILITY AND GREEN FINANCE ECOSYSTEM DRIVES PREMIUM VALUATIONS

Corporate sustainability commitments and ESG requirements create premium demand for verified recycled aluminum with proper certification and traceability. Aluminum recycling produces 95% lower greenhouse gas emissions compared to primary production, supporting corporate decarbonization goals.

Green finance ecosystem provides favorable funding with Indias sustainable debt market reaching $55.9 billion by 2024. Government issued Rs 160 billion in green bonds (2023), while banks offer sustainability-linked lending with performance-based pricing.

Carbon credit generation potential from recycling operations creates additional revenue streams beyond material sales. Each tonne of recycled aluminum avoids 14 tonnes of CO2 emissions compared to primary production, making recycling operations valuable carbon offset generators.

Certification advantages: ASI (Aluminum Stewardship Initiative) certification and verified recycled content documentation enable access to premium markets and green finance at favorable terms.

SECTOR-SPECIFIC OPPORTUNITIES RANK BY IMMEDIATE POTENTIAL

Packaging sector offers highest immediate returns with established 85% recycling rate, infinite recyclability, and proven circular economy infrastructure. UBC (Used Beverage Can) recycling commands premium pricing at $1,338/ton versus $215/ton for PET alternatives.

Automotive sector provides highest growth trajectory with EV revolution driving 12-15% annual aluminum demand growth and premium pricing for automotive-grade recycled materials. Strategic partnerships with OEMs create closed-loop systems with guaranteed supply and demand.

Construction sector presents massive long-term potential through Indias ^111 lakh crore infrastructure pipeline, though aluminums 20-30 year building lifecycle creates delayed scrap generation requiring patient capital strategies.

Electrical sector maintains steady baseline demand as Indias largest aluminum consumer (37% market share) with renewable energy expansion driving consistent growth in transmission infrastructure applications.

STRATEGIC POSITIONING FOR MAXIMUM VALUE CAPTURE

Immediate market entry strategy should focus on EPR service contracts with aluminum producers, advanced technology investments for automotive-grade processing, and domestic scrap collection network development to reduce import dependency.

Medium-term competitive advantages emerge through closed-loop partnerships with high- growth sectors (automotive, packaging), quality certification for premium applications, and geographic expansion to major aluminum-consuming states (Rajasthan, Gujarat, Karnataka).

Long-term value creation requires circular economy ecosystem integration, preparation for massive solar panel waste wave post-2030 (19,000 kt projected by 2050), and technology licensing opportunities as India becomes a recycling technology hub.

CONCLUSION: PERFECT STORM CREATES UNPRECEDENTED

The convergence of regulatory mandates, sector demand growth, technological advancement, supply-demand imbalance, and sustainability trends creates a perfect storm for aluminum recycling companies in India.

With secondary aluminum demand growing 5x faster than primary aluminum and government policies guaranteeing market demand through 2031, companies investing in advanced technology and strategic partnerships can capture disproportionate value in this rapidly expanding market.

The window for market leadership is now - early movers with proper technology, partnerships, and financing can establish dominant positions before the market fully matures. Success requires immediate action on EPR compliance services, technology investments, and strategic partnerships with high-growth end-use sectors.

INTERNAL CONTROL SYSTEMS, ITS ADEQUACY AND RISK MANAGEMENT

Your Company has an internal control system commensurate with the size, scale, and complexity of its operations. The aim of the internal control system is to manage business risks with a view to enhance shareholder value and safeguard the Companys assets.

Your Company has in place a robust mechanism for internal audits led by with a dedicated Assurance & Control Function comprising specialists. The Internal Auditor is duly appointed by the Audit Committee and Board., viz. M/s. Wadhawan Pandya & Co. for the business. The Audit Committee discusses audit plans and significant audit observations made by the internal auditor for necessary corrective actions. Our internal financial control framework is designed to ensure the accuracy and reliability of our financial and other records.

We have identified and documented key risks and controls for each process related to financial operations and reporting. An extensive programme of internal audits and management reviews supplement the process of the framework.

During the financial year under review, no significant deficiencies/material weaknesses that might impact financial statements have been reported by the Internal Auditor as at the Balance Sheet date.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

The discussion covers the financial results and other developments during the year under review in respect of the companys published result. Highlights below are given only for comparison. Financial Highlights for operating performance of financial year 2024-25:

Particulars	2024-25	2023-24
Total Income	52,453.87	42,945.04
EBITDA	4,086.57	2,043.61
PBT	2,411.61	928.57
PAT	1,800.98	720.08

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES, INDUSTRIAL RELATIONS, AND HEALTH, SAFETY & ENVIRONMENT

The financial ratios are mentioned as note no. 28 in the notes to accounts section.

The company believes that the human capital is the key contributor for the business growth and competitiveness. This includes not only the employees of the Company, but the skilled labour engaged at our factory units and through sub-contracting.

The number of employees as on 31st March, 2025 was 113 against 242 employees on the pay roll of the company during the previous financial year.

The company has during the year under review maintain excellent industrial relations at all levels. This has ensured that we have a committed and dedicated workforce with a high level of fervor.

Key Financial Ratios for 2024-25 compared with 2023-24

Particulars	2024-25	2023-24
Profitability ratios
a) Operating profit margin	7.75%	4.81%
b) Net profit margin	3.43%	1.68%
c) Return on net worth	30.46%	17.30%
Working capital ratios
d) Debtors turnover (days)	42 days	44 days
e) Inventory turnover (days)	81 days	61 days
Gearing ratios
f) Interest coverage	1.94	1.81
g) Debt / equity	2.41	2.38
Liquidity ratios h) Current ratio	1.31	1.30