Synopsis: A non-ferrous metal recycler posted record annual numbers but shocked investors with a sharp quarterly earnings collapse tied to copper pricing and global shipping disruptions.
This copper recycling company delivered its strongest ever annual performance in FY26, with consolidated revenue growing 48% year-on-year to ₹9,543 crores and profit after tax rising 56% to ₹347 crores. But what followed at the quarterly level wiped out market enthusiasm. Copper EBITDA per ton crashed from ₹42,000 in Q3 to just ₹14,000 in Q4, negative operating cash flow touched ₹600 crores, and multiple expansion projects hit delays due to geopolitical disruption in the Middle East. Investors responded sharply.
FY26 Was a Record Year, But Q4 Told a Different Story
Before diving into what went wrong, it is important to acknowledge what went right for Jain Resource Recycling. For the full year FY26, the company delivered revenue of ₹9,543 crores compared to ₹6,429 crores in FY25, a 48% jump. EBITDA grew 53% to ₹559 crores, with margins improving to 5.9% from 5.7%. PAT rose 56% to ₹347 crores, with PAT margins nudging up to 3.6%. Volume growth stood at 26.5%, with the balance of revenue growth coming from better realizations.
But Q4 FY26 painted a completely different picture. Consolidated revenue came in at ₹3,105 crores, up 76% year-on-year, yet EBITDA margins compressed sharply to 3.5%. Investors who were expecting the full-year momentum to carry into the March quarter were blindsided. The stock fell sharply as the quarterly numbers surfaced, and the market began asking hard questions about earnings quality and business predictability.
The Copper EBITDA Collapse Explained
The biggest blow came from the copper segment, which contributes roughly 55% of total revenue. Copper EBITDA per ton, which had surged to ₹55,000 in an earlier quarter and stood at ₹42,000 in Q3 FY26, crashed to just ₹14,000 in Q4.
Management explained this through a concept called the realization formula, which is the percentage of LME copper prices at which the company buys scrap and sells processed metal. Normally, this formula remains stable, varying by no more than 0.25% to 0.5%. But when LME copper prices surged nearly 40% in a matter of months, moving from $10,000 per tonne to $14,000, the formula became extremely volatile.
In Q3, Chinese buyers were aggressively purchasing scrap at higher formula rates in anticipation of further LME price rises. This created a tailwind for the company. But once LME prices stabilized and Chinese appetite cooled, formula rates fell sharply in Q4. This swing, from tailwind in Q3 to headwind in Q4, was the primary driver of the EBITDA per ton collapse. CFO Hemant Jain quantified the formula-related impact at around ₹18,000 to ₹18,500 per ton in Q4, with the geopolitical shipping disruption adding another ₹6,000 per ton hit.
Management has since guided for normalized copper EBITDA of ₹30,000 to ₹32,000 per ton on a steady-state basis, excluding the one-time distortions of FY26. They have also committed to long-term hedging formula mechanisms to prevent such volatility from repeating.
Middle East Conflict Disrupted Raw Material Flow
The Iran-Israel conflict created a second wave of pain. Shipping containers carrying raw material purchased from the US, South America and Europe were stuck at UAE’s Jebel Ali port, unable to be unloaded as vessels were stranded in international waters. This directly constrained raw material availability and pushed volumes lower across copper, lead and aluminium segments in Q4.
The disruption also elevated liner charges, port discharge fees, fuel costs and war risk premiums from shipping lines. Management clarified that the stuck material is fully price-hedged and carries no commodity risk, but the physical delay in receiving feedstock limited throughput during the quarter. New shipments are now being routed around the Middle East, and management stated that future logistics are back on track.
Negative Cash Flow Raised Earnings Quality Questions
Despite a profitable full year, the company reported negative operating cash flow of approximately ₹600 crores in FY26. Investors flagged this as a red flag. The CFO explained that the spike in copper prices inflated both inventory values and receivables, consuming working capital without the company needing to draw fresh bank borrowings. Additionally, a new NFRA accounting requirement now mandates that discounted receivables be shown separately rather than as a net-off figure, making the cash flow statement appear worse than it actually is.
Management guided that working capital cycle days, currently at 66 days, should come down to below 60 days over the coming quarters. They expect cash flows from operations to turn positive from Q2 FY27 onwards.
Growth Projects Delayed, But Not Cancelled
Multiple expansion projects under the copper value addition roadmap faced delays. Copper anode production commenced in March 2026 at 800 metric tons per month capacity, with a second furnace to add another 800 metric tons per month in Q1 FY27. Copper cathode commissioning is now expected in Q2-Q3 FY27 instead of earlier timelines. The wire rod project targets commissioning by August 2026 at 600 metric tons per month, while the bus bar unit aims for September 2026 at 1,500 metric tons per month.
The Ahmedabad JV with C&Y Group will begin scrap processing from September 2026, and the Kuwait battery recycling venture awaits shipping route normalization before machinery dispatch. Total FY27 capex is guided at ₹115 to ₹120 crores across all projects.
Management has guided that once all copper value addition projects are fully commissioned, incremental EBITDA from those products could add ₹22 to ₹45 per kg over and above the normalized recycling EBITDA, significantly improving overall margins.
Jain Resource Recycling Limited, part of the Jain Metal Group, is a Chennai-based non-ferrous metal recycler processing copper, lead, aluminium, tin and plastic scrap. The company sources material from over 120 countries and sells to domestic and export markets, with 62% of FY26 revenue coming from exports.
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