The Ardee Industries IPO explained

**SPEAKER_1** (0:01)
Hello, folks. Today, we were actually planning to talk about the new closing auction session, or CAS mechanism that's believed to have caused a sharp rise in the Nifty index on Monday. But then, we realized that we'd already explained this in detail over a year ago. So, if you've been wondering what all the fuss is about, or how this new mechanism works, you can check out our story. I will link it in the description for you to read. Instead, we stumbled upon something far more interesting, okay? A company called Ardee Industries is opening up its IP subscription today, which remains open until August 7th, and it's not your typical manufacturing business. So, in today's Finshots, we're taking a closer look at it.
But before we begin, here's a quick note from Dean Ditto. This weekend, we're hosting a free two-day insurance masterclass that helps you build real financial security by understanding health and life insurance the right way. Well, the masterclass is completely free, and you can head to the link in the description to register while your seats last. Okay, let's start with the story.
Folks, lead is a fascinating metal. Unlike most metals, it can be melted, recycled, and reused over and over again without losing its properties. That's precisely why over 80% of India's lead doesn't come from mines, but from scrap. Instead of digging up fresh lead ore, India largely depends on companies that recover lead from old batteries. And one such company is Ardee Industries, the protagonist of today's story.
As India electrifies more of everything with electric cars, solar rooftops, telecom towers, and backup power systems, the demand for lead-acid batteries and the recycled lead that goes into making them keeps climbing. Ardee sits right at the center of this loop. It buys used batteries and other lead-bearing waste, melts them down in giant rotary furnaces, purifies the metal, and then customizes it depending on what customers need. For instance, add a little calcium, and you get an alloy that helps batteries last longer with less maintenance. Mix in antimony, and you get tougher battery grids and castings. Throw in some tin, and you get lead that's ideal for soldering electronics. In other words, one raw material can wear five different hats, and that's reflected in Ardee's revenue mix. Where the biggest chunk comes from selling pure lead, close to a third comes from lead alloys, and the rest from scrap sales and other related products. The business itself is fairly straightforward. Ardee buys scrap, refines it, and sells the finished product for more than it paid. It sources battery scrap and lead blocks from both domestic and overseas suppliers. It then sells the refined lead to battery manufacturers like Mara Raja, cable manufacturers, and international traders, with prices largely tracking the London Metal Exchange or LME. And this simple business model has produced some incredible looking numbers. Revenue has climbed to 1167 crore rupees this year, translating into a staggering 59% CAGR over the last couple of years. Net profits grew even faster, from roughly 9 crore rupees to 85 crore rupees between FI24 and FI26, or a CAGR of over 20.7%, or a CAGR of over 207%.
EBITDA margins, that's the Operating Profit Margins, also more than doubled, rising from about 6% to nearly 13%.
Now, you're probably wondering how sales and profits exploded so quickly. Well, the biggest reason seems to be that Ardee almost doubled its production capacity from 54,750 metric tons per annum, that's MTPA, to 104 and 25 MTPA between FI24 and FI25. And once those furnaces and pollution control equipment are already in place, every additional ton costs relatively less to produce because a large part of the expenses are fixed. At the same time, import approvals for lead scrap, which are notoriously difficult to obtain in India, start coming through more smoothly. That meant Ardee could keep its furnaces running consistently instead of operating below capacity.
Then there's exports. The company expanded from serving four countries to eight. As a result, exports as a share of revenue jumped from 17% in FI24 to nearly 40% in FI26. On top of that, its gross margins per ton improved by almost 30%.
For the uninitiated, gross margin per ton is simply the difference between what Ardee sells its refined lead or alloys for and what it spends on raw materials and direct processing. Put all of this together, and that dramatic growth suddenly starts making a lot more sense.
And now, to fund its next phase of growth, Ardee is rolling out a 425 crore rupees IPO, which 320 crore rupees is a fresh issue. The company plans to use most of this money for two things, funding working capital and repaying around 20 crore rupees of debt. But understanding whether this IPO is as interesting as the business itself requires looking at both its strengths and its weaknesses. For starters, apart from these impressive financial numbers, Ardee has a few advantages that distinguish it from a typical scrap recycler. Its brand is listed on India's MCX, and more unusually, its refined lead is registered on the LME. That's a credibility stamp very few Indian recyclers have. Its plant in Tirupati, Andhra Pradesh, is also strategically located close to major battery manufacturers like Amara Raja Energy and Mobility, while also being near 3 pots. That allows Ardee to deliver products faster and spend less on transportation, giving it a meaningful cost advantage. There's another advantage too.