Eco Recycling Ltd Management Discussions

Industry Overview

Electrical and electronic equipment (EEE) continues to expand its footprint in modern life, accelerating demand in IT, telecom, consumer durables, and medical equipment. This consumption surge, while fueling socio-economic progress, is also creating unprecedented volumes of electronic waste (e-waste).

According to Allied Market Research, the global e-waste management market is projected to reach USD 244.6 billion by 2032, growing at a CAGR of 15.7%. In India, the sector is projected to expand at an even faster pace of 25% CAGR, supported by the Production Linked Incentive (PLI) scheme, digitization, and telecom growth.

For organized recyclers, this trajectory represents not just an environmental responsibility but a multi-dimensional business opportunity spanning precious metal recovery, data destruction, IT asset disposition (ITAD), and extended producer responsibility (EPR) compliance services.

Policy & Regulatory Environment

The Union Budget 2024-25 emphasized strategic resource securitization with the launch of the Critical Mineral Mission. Its provisions including customs duty exemptions on 25 critical minerals, domestic recycling support, and international acquisitions create a strong policy tailwind for companies engaged in precious metal and rare earth recovery.

Additionally, the E-Waste Management Rules 2022 mandate stricter EPR compliance, directly driving demand for scientific recycling solutions provided by players like Ecoreco.

Financial Linkage:

• The Critical Mineral Mission aligns with Ecorecos precious metal recovery facility, enabling new revenue streams from gold, silver, palladium, and rare earths extracted from PCBs and batteries.

• The strengthening of the EPR regime ensures recurring service revenue from brand owners, producers, and multinational corporations seeking compliance partners.

Market Dynamics and Growth Drivers

Revenue Mix Expansion:

• ITAD & Data Destruction: High-margin service segment driven by ESG and cybersecurity mandates.

• Precious Metal Recovery: Expected to deliver doubledigit growth as industrial demand for rare earths and precious metals rises.

• Battery Recycling: Lithium-ion recovery aligned with EV adoption trends, unlocking medium- to long-term growth.

• EPR Compliance & Reverse Logistics: Annuitized revenue through long-term contracts with OEMs and brands.

Margin Impact:

• Precious metal recovery offers higher EBITDA margins compared to traditional recycling.

• ITAD and refurbishment activities provide steady margins with lower capital intensity.

• EPR compliance generates stable fee-based income, supporting operating leverage.

Capital Investments (CapEx):

• During FY 2024-25, Ecoreco strategically invested in:

• Capacity expansion for rare earth and precious metal recovery.

• SmartER - Recycling on Wheels to deepen collection reach and secure feedstock.

• Digital platforms (barcoding, traceability) for compliance and client transparency.

These investments strengthen the Companys asset base, enabling both topline growth and margin expansion in subsequent years.

Company Performance & Positioning

Eco Recycling Ltd. (Ecoreco) remains the oldest and largest fully integrated e-waste recycler and ITAD provider in India, with:

• Certifications & Membership: R2v3, ISO, NAID, TERRA, MRAI.

• A wide service portfolio: IT asset disposal, data destruction, e-waste recycling, lithium-ion battery recycling, and EPR compliance.

• Partnerships with multinational corporations and government agencies for ESG-aligned solutions.

FY 2024-25 Highlights

• Revenue growth supported by new client acquisitions under EPR contracts.

• Commissioning of precious metal recovery lines, aligned with Critical Mineral Mission.

• Expansion of SmartER mobile recycling fleet.

• Training and integration of informal sector workers via Ecoreco Enviro Education Pvt Ltd.

Opportunities and Threats

Opportunities:

• Precious metal and rare earth recovery to strengthen margin profile and contribute significantly to revenue.

• EPR enforcement ensures steady annuity revenues.

• Expansion into Li-ion battery recycling supports longterm growth.

• Access to green financing, impact investors, and carbon- credit monetization.

Threats:

• Informal sector competition impacting collection efficiency.

• All categories of e-waste generators prefer to sale their e-waste to the informal sector for higher monetary value as against the recyclers for higher environmental compliances.

OUTLOOK

Globally, only 17% of e-waste is currently recycled through formal channels, yet e-waste remains the fastest-growing solid waste stream. This structural gap ensures continued growth for formal recyclers.

For India, the confluence of policy support (Critical Mineral Mission, EPR 2022), ESG imperatives, and rising awareness will drive a formalization wave in the industry.

Financial Outlook:

• Ecoreco anticipates rapid organic revenue growth over the next three years, supported by:

• Scaling of precious metal recovery and rare earth metal recovery out of black mass facilities.

• Increased demand for ITAD & cyber security-led data destruction services.

• Long-term EPR contracts with global and domestic brands.

• EBITDA margins are expected to improve with higher contribution from precious metal recovery and fee- based compliance services.

Continued CapEx in FY 2025-26 will focus on lithium-ion battery recycling and advanced collection infrastructure.

INDUSTRIAL RELATIONS

The industrial relations scenario continued to be largely positive across all the facilities. Long Term Wage and Bonus settlements were closed amicably for all the facilities. The sustained efforts towards building a transformational work culture resulted in zero production loss in the FY 2025 and helped create a collaborative, healthy and productive work environment.

Productive and employee centric practices, a focus on transparent communication of business goals, an effective concern resolution mechanism and a firm belief that employees are the most valuable assets of the Company, are the cornerstone of our Companys employee relations approach.

Ecoreco Skill Excellence

Skill excellence is an internal platform that aims at industrial skill enhancement program for the shop floor associates.

A Healthy Work Environment

Various awareness sessions on driving employees towards healthy and better lifestyle were touched upon by experts during the exclusive sessions for employees. Health and wellness always remained priority of the Companys philosophy.

The Company had a total of 55 permanent employees in its rolls as on March 31, 2025.

INTERNAL CONTROL SYSTEMS

Your Company maintains adequate internal control systems commensurate with the nature of its business and size and complexity of its operations. These are regularly tested for their effectiveness by Statutory as well as Internal Auditors.

The framework is a combination of entry level controls, including enterprise risk management, legal compliance framework, internal audit and anti-fraud mechanisms such as ethics framework, code of conduct, whistle-blower policy, etc, process level controls, information technology-based controls, period end financial reporting and closing controls.

Further, the Internal Control Systems have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information. In the highly data privacy IT environment of the Company, validation of IT Security receives focused attention from IT specialists and Statutory Auditors.

The Internal Auditor reports administratively to the Chairman of the Board and functionally to the Audit Committee. The Internal Audit function develops an audit plan for the Company, which covers, inter alia, corporate, core business operations, as well as support functions. The Audit Committee reviews the annual internal audit plan. Significant audit observations are presented to the Audit Committee, together with the status of the management actions and the progress of the implementation of the recommendations.

The Audit Committee reviews the adequacy and effectiveness of the Companys internal control environment and monitors the implementation of audit recommendations. During the year, the Company has taken steps to review and document the adequacy and operating effectiveness of internal controls. Nonetheless, your Company recognizes that any internal control framework, no matter how well designed, has inherent limitations and accordingly, regular audits and review processes ensure that such systems are reinforced on an ongoing basis.

Your Companys Management has carried out the evaluation of design and operative effectiveness of these controls and noted no significant deficiencies/material weaknesses that might impact financial statements as at the Balance Sheet date.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Overview

The financial statements have been prepared in accordance with Ind AS as per the Companies (Indian Accounting Standards) Rules, 2015 as amended and notified under section 133 of the Companies Act, 2013 ("Act") and other relevant provisions of the Act.

The Groups consolidated financial statements have been prepared in compliance with Ind AS 110 on Consolidation of Accounts and presented in a separate section.

FINANCIAL PERFORMANCE - STANDALONE

Property, Plant and Equipment and Intangible Assets

As at March 31, 2025, the Property, Plant and Equipment and Intangible Assets stood at Rs. 5,883 lakhs as compared to Rs. 3,934 lakhs as at March 31, 2024.

Trade Receivables

Trade receivables are Rs. 762 lakhs as at March 31, 2025 as compared to Rs. 445 lakhs as at March 31, 2024. As a percentage of revenue from sales of scraps and services, trade receivables are higher at 17% as at March 31, 2025, as compared to 16% for the previous year mainly on account of higher volume.

Results of Operations Income

(Rs. in lakhs)

Particulars	FY 2025		FY 2024		Change %
	Amount	% of revenue from operations	Amount	% of revenue from operations
Sale of Finished Goods	2,547	58	2,129	76	20
Sale of Services	238	5	263	9	(10)
Other Operating revenue	1,609	37	409	15	294
Income from Operations	4,394	100	2801	100	57
Other income	259	6	461	16	(44)

Other Income

During the year ended March 31, 2025 at Rs. 260 lakhs is higher than Rs. 461 lakhs earned in previous year mainly on account of proceedings from sale of current investment in the current year as compared to previous year.

The total expenditure during the year as a percentage of revenue is 33.32% as compared to 46.52% in the previous year. The reduction is a reflection of the cost management initiative undertaken by the Company.

Expenditure

(Rs. in lakhs)

Particulars	FY 2025		FY 2024		Change %
	Amount	% of revenue from operations	Amount	% of revenue from operations
Material cost	694	16	461	16	51
Employee benefit expenses	382	9	325	12	18
Finance cost	65	1	70	2	(8)
Depreciation, amortization and impairment cost	100	2	80	3	26
Other expenses	255	6	252	9	1
Total expenses	1,465	33	1,303	47	13

Material Cost

Material cost as a percentage of revenue has decreased from 16.46% in the previous year to 15.79% in current year mainly on account of elevated levels of input costs and supply side challenges witnessed during FY 2025.

Employee Benefit Expenses

The personnel cost as a percentage of revenue from operations has decreased from 11.60% in the previous year to 8.69% in the current year mainly due to the higher revenue base in the current year.

Other Expenses

Other expenses as a percentage of revenue from operations have decreased from 8.99% in the previous year to 5.80% in the current year mainly on account of stringent cost control measures adopted by the Company coupled with higher revenue base in the current year.

Depreciation, Amortisation and Impairment Expense

Depreciation, amortisation and impairment as a percentage of revenue from Operations have decreased from 2.85% in the previous year to 2.28% in the current year mainly due to higher revenue base in the current year.

Finance Cost

The interest expense as a percentage of revenue has increased from 2.48% in the previous year to 1.47% in the current year mainly on account of lease agreement borrowings in the current year.

Tax Expense

The provision for current tax and deferred tax for the year ended March 31, 2025, as a percentage to prof it before tax (before exceptional items) is higher than the previous year mainly on account of higher revenue base in FY 2024-25 as compared to FY 2023-24.

CONSOLIDATED FINANCIAL POSITION

As on March 31, 2025, for the purpose of consolidation as per Ind AS, the group comprised of the flagship holding company Eco Recycling Limited and 2 subsidiaries.

The Consolidated Revenue from operations is Rs. 4,396 lakhs in the current year as compared to Rs. 2,801 lakhs in the previous year, registering an increase of 56.92%.

The consolidated profit before exceptional items, share of profit of associates and joint ventures and tax for the year is Rs. 3,167 lakhs as against Rs. 2,220 lakhs in the previous year, registering an increase of 42.61%. The consolidated profit after tax after non-controiiing interests and exceptional items for the year is Rs. 2,295 lakhs as against profit of Rs. 1,950 lakhs in the previous year.

Ecoreco Enviro Education Private Limited, a wholly owned subsidiary in the business of imparting environment preservation and protection related education and skill Development training, registered an operating revenue of Rs. 19 lakhs as compared to Rs. 20 lakhs in the previous year, registering an decrease of 1.14%. The profit after tax after non-controlling interests for the year is Rs. 23.74 lakhs as compared to Rs. 21.45 lakhs in the previous year, registering an increase of 10.71%.

Ecoreco Park Private Limited, a subsidiary in the investment business, reported an operating revenue of Rs. (31) lakhs as compared to Rs. 262 lakhs in the previous year. The loss after tax after non-controlling interests for the year is Rs. 19.56 lakhs as compared to a loss Rs. 181 lakhs in the previous year.

DISCLAIMER

Certain statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forwardlooking statements" within the meaning of applicable laws and regulations