On December 7, 2024, Godawari Power and Ispat Ltd. (GPIL) announced the completion of its acquisition of a 51% stake in Jammu Pigments Ltd. (JPL), valued at ₹500 crores. This strategic move positions GPIL in the growing non-ferrous metal recycling industry, which has seen increasing demand for sustainable practices and products.

• GPIL’s Stake: 51% (49% acquired initially, with the balance set to be acquired under specific conditions).
• Transaction Value: ₹254.52 crores.
• Acquisition Structure: The transaction comprises a mix of compulsory convertible preference shares (CCPS) and secondary sale by promoters.

Transaction Structure

• Market Cap of JPL: ₹500 crores.
• Deal Components:
  • Fund infusion for CCPS issuance: ₹175 crores (35%).
  • Secondary sale by promoters: ₹79.52 crores (16%).
• Completion: 49% stake acquired, with the remaining 2% to be completed after compliance with certain conditions.

Company Profile: Jammu Pigments Ltd.

Business Model and Operations
Jammu Pigments is a pioneer in non-ferrous metal recycling, transforming industrial waste into valuable products. With a focus on circular economy principles, JPL processes metals like lead, zinc, copper, and cadmium from discarded industrial by-products. The company operates plants in Kathua (J&K) and Kota (Rajasthan), providing significant growth potential in the recycling space.

• Core Products: Lead alloys, zinc oxide, copper cathodes, and cadmium.
• Processing Methods: Hydro metallurgy, pyro metallurgy, and refining technologies.

Strategic Rationale for Acquisition

• Expansion into Non-Ferrous Recycling: This acquisition enables GPIL to enter the lucrative non-ferrous metal recycling market, capitalizing on rising demand for recycled metals in India.
• Circular Economy Impact: The acquisition aligns with global sustainability trends, focusing on waste reduction and resource efficiency.
• Synergies with Existing Operations: GPIL will benefit from synergies, including the recycling of zinc residues from its galvanizing operations.

India's Growing Non-Ferrous Metals Market

India is a major importer of non-ferrous metals such as lead, zinc, and copper. The acquisition of JPL will help GPIL address the country’s dependency on imports and improve its supply chain resilience.

• Imports of Non-Ferrous Metals in FY23:

  • Lead: USD 991 million
  • Zinc: USD 851 million
  • Copper: USD 9070 million

• Recycling Opportunities:

  • With the introduction of new policies like BWMR, the non-ferrous recycling industry is set to benefit from reduced informal sector activity and increased formalization.

JPL's Financial Performance

JPL has demonstrated impressive financial growth over the past few years, with a compounded annual growth rate (CAGR) in revenue, EBITDA, and PAT of 28%, 38%, and 48%, respectively. This strong track record provides a solid foundation for GPIL to leverage as it integrates JPL into its operations.

• FY24 Key Metrics:
  • Revenue: ₹1,174 crores (YoY growth of 16%).
  • EBITDA: ₹75 crores (EBITDA margin of 6%).
  • Net Profit (PAT): ₹29 crores.

Future Expansion Plans

JPL’s Planned Capacity Expansion
JPL aims to significantly enhance its production capacity for key metals such as lead, zinc, copper, and cadmium. The expansion will include new facilities and technologies to increase throughput and improve efficiency.

• Planned Capacity (by FY27):
  • Lead: 177,148 TPA (up from 126,198 TPA).
  • Zinc: 39,478 TPA (up from 29,431 TPA).
  • Copper: 6,231 TPA (up from 4,981 TPA).
  • Cadmium: 13,900 TPA (up from 8,400 TPA).

Investor Presentation Highlights

• Revenue Growth: JPL's revenue has grown from ₹904 crores in FY20 to ₹1,174 crores in FY24.
• EBITDA Margin Improvement: From 3% in FY20 to 6% in FY24.
• Strong Profit Growth: PAT increased from ₹7.2 crores in FY20 to ₹29 crores in FY24.

Conclusion:

The acquisition of Jammu Pigments Ltd. represents a significant strategic move for Godawari Power and Ispat Ltd. into the non-ferrous metals recycling industry. With strong financial performance, an innovative business model, and significant expansion plans, JPL offers substantial growth potential for GPIL. This acquisition enhances GPIL's ability to capitalize on the growing demand for sustainable and recycled metals in India.

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