Top 4 Stocks to Ride the Battery Recycling Megatrend

As the demand for portable energy sources continues to rise, the use of batteries in various applications-from consumer electronics to electric vehicles-has surged dramatically.

However, this growing reliance on batteries brings significant environmental challenges, particularly concerning their disposal and recycling.

Improperly discarded batteries can lead to soil and water contamination due to the toxic materials they contain, such as lead, cadmium, and lithium.

Effective battery recycling is essential to mitigate these environmental risks, recover valuable materials, and promote sustainable practices.

Battery recycling management involves the systematic collection, processing, and repurposing of used batteries to extract reusable components while ensuring safe handling and minimal ecological impact.

By implementing robust recycling systems, we can not only reduce landfill waste but also diminish the need for raw material extraction, thereby conserving natural resources and lowering greenhouse gas emissions.

Governments worldwide continue to implement stringent regulations and incentives to promote battery recycling adoption.

Global production scrap is estimated to reach 86 GWh by 2024, with a projected increase to 200 GWh by the end of the decade. Combining all sources, available feedstock for battery recycling will amount to 522 GWh, equivalent to 16% of total battery demand by 2032.

In this article, we will look at the top companies that work in the battery recycling management space or supply raw materials required for battery recycling in India.

#1 Himadri Speciality Chemicals

Himadri Speciality Chemical is primarily engaged in the manufacturing of carbon materials and chemicals.

As pioneer in the production of lithium-ion battery anode material in India, the company continuously develops and innovates raw materials of lithium-ion battery value chain.

It's the #1 coal pitch manufacturer in India and is the only company to manufacture advanced carbon materials in India.

It's a prominent player in multiple specialty carbon product segments like coal tar pitch, carbon black, naphthalene, refined naphthalene, SNF, and specialty oils, among others.

Himadri derives roughly 86% of revenues from the Indian market and balance 14% revenues from exports.

The company owns 7 manufacturing facilities in India out of which 4 are located in West Bengal, 1 each in Chhattisgarh, Andhra Pradesh, Odisha. Additionally, it owns 1 facility in China.

Coming to the financials, Himadri reported a 26.2% growth in revenue in Q1FY25 and EBITDA growth came in at 43.2%. EBITDA margins also improved from 14.1% in Q1FY24 to 16% in Q1FY25.

Going ahead, the management has guided for an estimated capex of Rs 2.2 bn to increase capacity of speciality carbon black line by 130,000 mtpa. This capacity is scheduled to be in operation by Q3FY26.

#2 Kabra Extrusion Technik

Kabra Extrusion Technik Limited was incorporated in 1982. It's part of the Kolsite group and operates in the business of plastic extrusion machinery and battery division.

The company started manufacturing of lithium ion battery packs in FY21. It derives 43% revenues from the battery manufacturing business and balance 57% from the plastic extrusion machinery business.

The company has 18% market share in the lithium ion batteries segment. The battery division serves E-2 Wheelers, E-3 Wheelers, LCVs, and swapping stations.

Kabra has a presence in over 100 countries including Americas, Middle East, Asia, and Africa. Export revenues account for 10% of total revenues.

The batteries division has facilities for design, development, and production in Chakan, Pune. In FY24, the company added 5 additional cylindrical and 4 prismatic battery pack production lines. It also enhanced the annual production capacity to 2 GWH at a cost of Rs 1 bn.

Coming to the financials, Kabra reported a 34% degrowth in revenue in Q1FY25. EBITDA degrowth came in at 28.8%. EBITDA margins however improved from 9.3% in Q1FY24 to 10% in Q1FY25.

In June 2024, Kabra Extrusion Technik Ltd. and Eve Power Co. Ltd. (EVE) agreed to partner to deliver advanced Battery Energy Storage System (BESS) solutions in India. Kabra will build and integrate the battery cells and DC side ESS components that EVE supplies at its production plant in India.

According to Ekta Kabra, MD of Kabra Extrusion Technik Ltd, the demand for the BESS market is set to soar and will be a major disruptor in India's power sector in the coming years.

#3 NILE

Incorporated in 1984, Nile Ltd is a manufacturer of pure lead for battery consumption.

The company is a secondary manufacturer of pure lead and lead alloys which are supplied to the manufacturers of lead acid batteries, PVC stabilizers, and lead-oxide.

NILE has 2 lead recycling plants, one in Choutuppal with a capacity of 32,000 TPA, and other in Tirupati with a capacity of 75,000 TPA.

The company has two 100% subsidiaries viz. NLCPL, which would operate a lithium-ion recycling plant, and NEPL, which would operate in the natural extracts sector and cater to thegrowing needs of the nutraceutical, cosmetic, and food industry.

For the battery recycling company NLCPL, Nile expects to incur capex of around Rs 600 m over FY24-26.

Nile's top 2 customers account for 100% of the sales. One major customer is Amara Raja Batteries which accounts for almost 91% of sales thereby suggesting that the company has high client concentration.

ARBL's group company, Mangal Industries Limited, contributed 9% of the total sales. Nile sells to ARBL on a contractual basis.

The contract renews every year with ARBL and has a minimum offtake clause. Amara Raja will buy a minimum agreed quantity. So, Nile can plan its inventory purchases accordingly.

Nile's recycling facilities are strategically placed near the factory of Amara Raja.

Coming to the financials, NILE Ltd reported a growth of 52.2% in its consolidated revenues and EBITDA grew by 70.7% for Q1FY25. EBITDA margins improved slightly to come in at 5.3% versus 4.7% in the previous year.

#4 Namo E-waste Management

Recently listed Namo E-waste Management Ltd was founded in 2014. It offers services for collection, disposal and recycling of E-waste.

Namo E-waste Management provides comprehensive services for recycling of electrical and electronic equipment (EEE) such as air conditioners, refrigerators, laptops, phones, washing machines, fans, etc.

The company derives 70% of its revenues from electronic recycling, 13% from refurbishment, and 17% from extended producer responsibility services.

Geographically, it derives 44% revenues from Haryana, 24% from Maharashtra, 14.5% from Delhi, 8.5% from Rajasthan, and 4% from Tamil Nadu.

The company has a leased factory in Faridabad, Haryana, and a storage and dismantling unit in Palwal, Haryana.

As authorised recyclers, the company contracts with manufacturers to collect e-waste from service centres and retail outlets. Additionally, it works with aggregators who collect e-waste door-to-door across India for EPR support.

Namo is funding its subsidiary, Tech Eco Waste Management LLP, to establish a lithium battery recycling plant in Nashik.

This plant will recycle waste lithium batteries, such as cell phone laptop batteries, cylindrical batteries, EV batteries, soft battery pouch, scrap leftover material of cathode etc.

The company mopped up Rs 0.6 m though fresh issue of shares with an allotment price band of Rs 80-85 per share, in the IPO.

Conclusion

The battery recycling megatrend represents a pivotal shift in the energy and sustainability landscape, driven by the increasing demand for electric vehicles and renewable energy storage solutions.

As governments and corporations prioritise sustainable practices, companies engaged in battery recycling are poised for significant growth.

Investors should keep an eye on key players in this sector, focusing on those with innovative technologies, strong partnerships, and robust supply chains.

By identifying and supporting these forward-thinking companies, investors can not only capitalise on a burgeoning market but also contribute to a more sustainable future.

As the world moves toward a circular economy, the potential for substantial returns in battery recycling stocks is considerable, making this an exciting area to watch in the coming years.

However, investors must also pay attention to the risks involved in pursuing this megatrend. Battery recycling sector faces a lot of challenges from regulatory challenges, technological uncertainty, stiff competition, supply chain issues, capital intensity, etc.

Remember the challenges before diving headfirst.

Happy Investing!

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