Financial Performance Overview

Revenue:

  • Q1 FY27 revenue: INR542 crores
  • Year-over-year growth: 14%
  • Sequential decline: 11% from Q4 FY26

Segment Performance:

  • Specialty Chemicals revenue: INR177 crores (33% of total revenue)
  • Specialty Chemicals YoY growth: 38%
  • Basic Chemicals revenue: INR361 crores
  • Basic Chemicals sequential decline: 18%

Profitability:

  • EBITDA including other income: INR41.4 crores
  • YoY EBITDA decline: 28%
  • Sequential EBITDA decline: 41%

Segment EBITDA:

  • Specialty Chemicals EBITDA growth: 20% YoY
  • Specialty Chemicals sequential EBITDA growth: 35%
  • Basic Chemicals EBITDA: Negative INR14 crores

Other Financial Metrics:

  • Finance cost: INR14.8 crores (2% reduction YoY, 4% reduction sequentially)
  • Depreciation: INR26 crores (broadly stable)

Key Operational Highlights

Specialty Chemicals Segment:

  • CPVC volumes increased 59% YoY
  • Synthetic Iron Oxide Pigment (SIOP) volumes increased approximately 3%
  • CPVC capacity expansion recently completed

Basic Chemicals Segment Challenges:

  • PVC volumes declined 20% due to VCM supply constraints
  • West Asia crisis caused temporary non-availability of VCM
  • Elevated VCM prices due to supply chain disruption
  • Temporary suspension of import duties on petrochemical products pressured PVC realizations
  • Management estimated INR50-55 crore swing in PVC contribution compared to Q4 FY26

Product Capacity Details:

  • PVC capacity: 1 lakh tons
  • CPVC capacity: 50,000 tons
  • Caustic soda realistic capacity: 90,000 tons
  • Synthetic Rutile capacity: 48,000-50,000 tons
  • SIOP current capacity: approximately 30,000 tons

Strategic Developments & Capital Allocation

Leadership Transition:

  • Appointment of Sudarshan Ganapathy as CEO

Growth Investments:

  • INR250 crores investment program over next 2-3 years
  • SIOP capacity expansion from 30,000 to 45,000 tons per annum
  • Phase 1: 7,000 tons addition targeted for Q4 FY28 completion
  • Phase 2: 8,000 tons with infrastructure pre-built
  • Captive power infrastructure investment at Sahupuram facility targeted for Q4 FY28
  • Targeting minimum incremental ROCE of 20% on new investments

Balance Sheet Position:

  • Legacy long-term debt expected to be fully repaid during FY27
  • Company on track to become effectively net debt free by end of FY27 (before incremental borrowings for new projects)
  • Maintains treasury discipline of 5-10% of top line as cash/cash equivalents

Tax Regime Change

  • Company migrated to new concessional tax regime (25.17% rate including surcharge and cess)
  • Reduction in net deferred tax liability by INR34 crores due to old rate differential
  • MAT credit utilization now permitted at 25% of regular tax liability under new regime

Market Environment & Outlook

Current Market Conditions:

  • VCM availability improved and supply chain conditions normalizing
  • Normal import duties reinstated by government
  • Minimum import price framework introduced for suspension-grade PVC
  • Current PVC prices: $820-$860 levels (much higher than MIP of ~INR80)

FY27 Guidance:

  • Expect FY27 to close at better level than previous fiscal
  • Steady-state EBITDA target: approximately INR300 crores (revised from previous INR400 crore target due to PVC/CPVC spread contraction)
  • Expect improved operating conditions in coming quarters

Segment Outlook:

  • SIOP business typically sees volume surge in Q3 and Q4
  • Synthetic Rutile profitability expected to improve with better customer mix and scheduling
  • Caustic soda ECU realizations improved due to complete internal chlorine consumption

Q&A Session Key Points

PVC Business Impact:

  • Basic Chemicals segment loss primarily from PVC business only
  • Caustic soda, soda ash, and Synthetic Rutile remained profitable
  • Estimated INR50-55 crore swing in PVC contribution from Q4 levels

Expansion Plans:

  • SIOP expansion is brownfield
  • Current SIOP margins: ~35-36% with realizations around INR80,000/ton
  • Power infrastructure investment aimed at structurally lowering costs

Supply Chain:

  • Entire VCM requirement imported (no merchant VCM seller in India)
  • Migrated from single source (Qatar) to global distributor for supply derisking
  • No plans for VCM backward integration due to capacity constraints

Capital Structure:

  • Debt repayments of approximately INR135 crores planned for FY27
  • May borrow slightly more than repayments for growth projects
  • Considering share buyback options under new SEBI framework