Cosmo First Limited Q2 FY27 Earnings Conference Call Summary

Management Participants

  • Mr. Ashok Jaipuria, Chairman and Managing Director
  • Mr. Pankaj Poddar, Group CEO
  • Mr. Neeraj Jain, Group CFO
  • Mr. Kulbhushan Malik, Global Business Head - Cosmo Films
  • Mr. Saurabh Jain, CEO Zigly and Head Corporate Development

Financial Performance for Q2 FY27 (Consolidated)

  • Sales: ₹1,388 crore, up 51% Year-on-Year (YoY). Growth driven by 15% volume increase and higher realizations from raw material price pass-through.
  • EBITDA: ₹177 crore, up 38% YoY (from ₹128 crore in Q2 FY26).
  • EBITDA Margin: 12.8% vs. 14.0% in Q2 FY26. Management clarified that margin percentage is not the right benchmark due to raw material volatility; absolute EBITDA and contribution per kg are preferred metrics.
  • Normalized EBITDA: ₹159 crore (after adjusting for one-offs), representing 24% YoY growth.

One-Time Items Affecting Q2 EBITDA

1. Positive: US subsidiary recorded a write-back of ₹24.8 crore from a refund of additional customs duties from the US government.

2. Negative: Inventory loss of ₹7 crore due to a sharp decline in raw material prices.

Business Vertical Performance (Q2 FY27)

1. Films Business (BOPP & BOPET)

  • BOPP Gross Margin: ₹29 per kg (vs. ₹30/kg in Q1 FY27 and ₹22/kg in Q2 FY26).
  • BOPET Gross Margin: ₹12 per kg (vs. ₹9/kg in Q1 FY27 and ₹6/kg in Q2 FY26). BOPET constitutes ~10% of film capacity.
  • Specialty Film Margin: Remained stable at ~₹62 per kg.
  • Specialty Sales Mix: Specialty and semi-specialty films now constitute ~60% of total volume. H1 FY27 specialty volume growth was 20% YoY.
  • USA Film Business: Delivered more than 50% growth YoY in Q2. Volume growth was 35% in the quarter. Anticipated to do ~$70 million in FY27, with a target to exceed $100 million next year.
  • Capacity Utilization: ~90% with a potential to increase volumes by 8-10% further.

2. Specialty Chemicals (Subsidiary)

  • H1 FY27 revenue grew 59% YoY to ~₹155 crore.
  • Q2 revenue growth was 80%+ YoY, backed by 60% volume growth.
  • EBITDA margin for the subsidiary was 23% in Q2.
  • Third-party sales were 17% in Q2; growth rate for third-party sales is higher than internal group sales. Target is to reach a 50-50 ratio in the medium to long term.
  • Medium-term target: Build a ~₹500 crore revenue business with 20%+ ROCE.

3. Rigid Packaging (Cosmo Plastech)

  • Q2 revenue: ₹39 crore, up 90% YoY.
  • Second consecutive profitable quarter with 8% EBITDA margins.
  • Brand sales rose to 67% of revenue from 50% a year ago.

4. Consumer Businesses (B2C)

  • Cosmo Consumer (Window films, PPF, Ceramic Coatings):
  • Q2 revenue growth: 70% YoY; H1 FY27 revenue growth: 260% YoY.
  • Q2 EBITDA loss: ₹4.5 crore, attributed to the commencement of television advertising and brand-building from July 2026.
  • Operational business is close to break-even excluding marketing spend.
  • Market: India's paint protection film (PPF) market is estimated at ~₹500 crore, growing ~30% YoY with low penetration (1-2% vs. ~15% in China).
  • Distribution: PPF dealer network expanded from 150 to 250 in Q2; window film network at 150 dealers across 100+ cities; 4 car care centres operational.
  • Zigly (Pet Care):
  • Q2 revenue growth: 47% YoY.
  • Business Mix: Services constituted 68% of offline sales in Q2; private label sales more than doubled YoY.
  • Network: 48 centres, including 3 hospitals.

Capacity Expansion & Capex

  • Two capacity additions planned for H2 FY27:

1. 16,000 tons of high-end chemical coated film capacity.

2. 9-layer barrier sheet line with 10,000 metric tons annual capacity.

  • Both are high-margin specialty assets (~20%+ margins). Customer approvals will take time; revenue will ramp up quarter-on-quarter.
  • FY27 Capex Guidance: ₹100-110 crore.
  • FY28 Capex Outlook: ~₹50-70 crore (maintenance and some specialty growth capex).
  • Major growth capex cycle of ~₹1,250-1,300 crore over the last 3 years is largely complete and reflected in the September 2026 balance sheet.

Balance Sheet & Debt

  • Net Debt: Reduced to ₹1,057 crore as of September 2026 (from ₹1,159 crore at March 2026-end), despite a ₹148 crore increase in net working capital due to higher raw material prices.
  • Net Debt to EBITDA: 1.9x.
  • Priority: Reduce net debt by ₹300-500 crore over the next two years.

Taxation

  • The company adopted the concessional tax regime (new tax regime) from FY27.
  • Q2 tax includes a one-time credit of ₹14 crore arising from this transition.
  • For FY27, the effective tax rate is expected to be in the range of -6% to -7% (tax writeback).

Sustainability Initiative

  • Focus on increasing renewable power share to ~2/3 of total power requirements by next year.
  • Expected annual power-cost savings: ₹25-30 crore.

Management Guidance & Outlook

  • Specialty Sales Mix Target: Aiming for 65-70% in FY28 and ~80% in the medium term.
  • B2C Businesses: Projecting >60% growth for both Zigly and Cosmo Consumer. Marketing investment in Cosmo Consumer will continue for ~2 years to build the brand.
  • US Business: Target to exceed $100 million in revenue next year.
  • Overall Focus: Improve ROCE, reduce net debt, and leverage completed capex.

Other Key Points from Q&A

  • Raw Material Prices: Remain highly volatile, linked to the West Asia crisis. Difficult to predict future movements.
  • Port Congestion: Situation improved in Q2 vs. Q1 but remains challenging and linked to geopolitical events.
  • Zigly Transaction: The company continues to explore options to realize value for Zigly and ensure its next growth phase doesn't weigh on Cosmo's balance sheet. No concrete update provided.
  • Share Split: A shareholder suggestion to split the company's thinly traded equity was noted by management.
  • JV with Korean Entity: Focused on growing specialty volumes in Korea/Japan. Approval processes are lengthy. Expected to contribute decent margins in 3-5 years.