28-Oct-2026 21:56:56
DCM SHRIRAM LTD Q2 CONCALL: RENEWABLE POWER TARGET OF ONE-THIRD OF TOTAL REQUIREMENTS, 70–80 MW ADDITIONAL CAPACITY PLANNED, DEMERGER PROGRESS TARGETED AROUND Q1 FY28 & NEW CHEMICAL CAPACITY RAMP-UP
• MANAGEMENT TARGETS RENEWABLE ENERGY TO CONTRIBUTE APPROXIMATELY ONE-THIRD OF TOTAL POWER REQUIREMENTS OVER THE NEXT YEAR, SUPPORTING LOWER ENERGY COSTS & IMPROVED COMPETITIVENESS • MANAGEMENT PLANS APPROXIMATELY 70–80 MW OF ADDITIONAL RENEWABLE POWER CAPACITY, BUILDING ON THE EXISTING PEAK CAPACITY OF AROUND 107 MW • MANAGEMENT EXPECTS RETURNS ABOVE APPROXIMATELY 20–25% ON RENEWABLE POWER INVESTMENTS, SUPPORTED BY SAVINGS AGAINST CONVENTIONAL ENERGY COSTS • MANAGEMENT INDICATED THAT THE PROPOSED DEMERGER IS AT AN ADVANCED STAGE, WITH BOARD-LEVEL PROGRESS TARGETED AROUND Q1 FY28 • MANAGEMENT CLARIFIED THAT Q1 FY28 REPRESENTS AN INTENDED TIMELINE FOR PROGRESSING THE DEMERGER SCHEME, NOT A CONFIRMED COMPLETION DATE • MANAGEMENT EXPECTS CHEMICALS PROFITABILITY TO BENEFIT OVER TIME FROM HIGHER CAPACITY UTILIZATION, DOWNSTREAM INTEGRATION, COST OPTIMIZATION & NEW PROJECT RAMP-UP • MANAGEMENT TARGETS APPROXIMATELY 45% CAPTIVE CHLORINE CONSUMPTION AT BHARUCH & 62% AT KOTA AFTER RELEVANT DOWNSTREAM PROJECTS ARE COMMISSIONED • INCLUDING PIPELINE-LINKED CUSTOMERS, MANAGEMENT EXPECTS APPROXIMATELY 70% OF BHARUCH CHLORINE OUTPUT TO BE CAPTIVELY CONSUMED OR LINKED TO DIRECT CUSTOMERS • MANAGEMENT EXPECTS STRONGER CHLORINE INTEGRATION TO REDUCE EXPOSURE TO NEGATIVE CHLORINE REALIZATIONS & SUPPORT MORE STABLE CAUSTIC SODA ECONOMICS • MANAGEMENT EXPECTS CAUSTIC SODA OPERATIONS TO BENEFIT FROM DOWNSTREAM DEMAND, EXPORT OPPORTUNITIES & HIGHER PLANT UTILIZATION, SUBJECT TO MARKET PRICES • MANAGEMENT EXPECTS PVC DEMAND TO IMPROVE DURING Q3 & Q4 FY27 FOLLOWING THE MONSOON SEASON, SUPPORTING VINYLS SALES VOLUMES • MANAGEMENT CAUTIONED THAT PVC PROFITABILITY REMAINS HIGHLY SENSITIVE TO FUEL COSTS, WITH ENERGY ACCOUNTING FOR APPROXIMATELY 60–70% OF PRODUCTION COSTS • MANAGEMENT EXPECTS THE MINIMUM PVC IMPORT PRICE OF US$766 PER TONNE & APPLICABLE DUTIES TO PROVIDE SOME SUPPORT TO DOMESTIC REALIZATIONS • MANAGEMENT PLANS TO OPTIMIZE ETHANOL FEEDSTOCK MIX, INCLUDING GREATER USE OF FCI RICE WHERE AVAILABLE, TO ADDRESS PRESSURE ON MAIZE-BASED ETHANOL ECONOMICS • MANAGEMENT EXPECTS MAIZE-BASED ETHANOL MARGINS TO REMAIN UNDER PRESSURE DUE TO HIGHER FEEDSTOCK COSTS & LOWER PROCUREMENT REALIZATIONS • MANAGEMENT EXPECTS SUGAR OPERATIONS TO REMAIN DEPENDENT ON CANE AVAILABILITY, RECOVERY RATES & WEATHER CONDITIONS, WITHOUT PROVIDING NUMERICAL PRODUCTION GUIDANCE • MANAGEMENT EXPECTS FENESTA GROWTH TO BE SUPPORTED BY ALUMINIUM WINDOWS, FAÇADES, EXTRUSION CAPACITY EXPANSION & NEW WOODEN DOOR PRODUCTS • MANAGEMENT EXPECTS WOODEN DOORS TO EXPAND FENESTA'S PRODUCT PORTFOLIO BY Q4 FY27, SUBJECT TO PRODUCT LAUNCH EXECUTION • MANAGEMENT CONFIRMED PHASE 1 OF THE KOTA ALUMINIUM EXTRUSION FACILITY HAS BEEN COMMISSIONED, WHILE PHASE 2 DEVELOPMENT IS PROGRESSING • MANAGEMENT EXPECTS A POSSIBLE PARTIAL RECOVERY IN SHRIRAM FARM SOLUTIONS SALES DURING Q3 FY27, DEPENDING ON CROP CONDITIONS & CHANNEL DEMAND • MANAGEMENT DID NOT PROVIDE NUMERICAL FY27 OR FY28 REVENUE, EBITDA, PBDIT OR PAT GUIDANCE • MANAGEMENT DID NOT ENDORSE THE SUGGESTED FY28 REVENUE TARGET OF ₹20,000 CR DURING THE ANALYST DISCUSSION • Q2 FY27 NET REVENUE INCREASED 22% YOY TO ₹3,977 CR VS ₹3,272 CR, SUPPORTED BY CHEMICALS, VINYLS, FERTILIZERS & FENESTA • Q2 PBDIT DECLINED APPROXIMATELY 21.8% YOY TO ₹319 CR FROM ₹408 CR, REFLECTING INPUT-COST PRESSURE & THE ABSENCE OF PRIOR-YEAR ONE-TIME BENEFITS • Q2 PBDIT MARGIN DECLINED TO APPROXIMATELY 8% FROM 12.5% LAST YEAR, INDICATING SIGNIFICANT OPERATING PROFITABILITY PRESSURE • THE PRIOR-YEAR QUARTER INCLUDED APPROXIMATELY ₹91.5 CR OF ONE-TIME BENEFITS, INCLUDING ₹76 CR GUJARAT GOVERNMENT INCENTIVES & ₹15.5 CR SUGAR POWER TARIFF BENEFIT • NET DEBT INCREASED TO ₹917 CR AS OF SEPTEMBER 2026 FROM ₹773 CR A YEAR EARLIER, REFLECTING ONGOING INVESTMENTS & WORKING CAPITAL REQUIREMENTS • REPORTED ROCE DECLINED TO APPROXIMATELY 12% FROM 15% IN THE COMPARABLE SEPTEMBER PERIOD • CHEMICALS REVENUE GREW 47% YOY, WHILE SEGMENT PBDIT DECLINED TO ₹158 CR FROM ₹254 CR DUE TO HIGHER ENERGY & INPUT COSTS • MANAGEMENT INDICATED CHEMICAL PRODUCTION COSTS INCREASED APPROXIMATELY 6–8%, WHILE SELLING PRICES DECLINED APPROXIMATELY 4–6% IN SEVERAL CATEGORIES • CAUSTIC SODA VOLUMES INCREASED 2% YOY, ECU REALIZATIONS IMPROVED 6% & CAPACITY UTILIZATION REACHED APPROXIMATELY 88–89% • VINYLS PBDIT INCREASED TO ₹51 CR FROM ₹12 CR, SUPPORTED BY STRONGER PVC & CARBIDE PRICES AND VOLUMES • PVC VOLUMES GREW 29% YOY & REALIZATIONS IMPROVED 25%, WHILE CARBIDE VOLUMES INCREASED 15% & REALIZATIONS ROSE 16% • SUGAR & ETHANOL REVENUE GREW 10% YOY, WHILE SEGMENT PBDIT IMPROVED TO ₹62 CR FROM ₹33 CR • DOMESTIC SUGAR PRICES INCREASED 14% YOY, SUGAR VOLUMES DECLINED 6% & ETHANOL VOLUMES GREW 24% • FENESTA REVENUE INCREASED 22% YOY & PBDIT GREW 15% TO ₹49 CR, WITH PROJECT BUSINESS CONTRIBUTING APPROXIMATELY 45% OF SALES • SHRIRAM FARM SOLUTIONS REVENUE DECLINED 10%, WHILE PBDIT FELL TO ₹78 CR FROM ₹106 CR DUE TO WEAKER SEED & SPECIALTY NUTRITION PERFORMANCE • BIOSEED REPORTED A ₹41 CR PBDIT LOSS VS A ₹7 CR LOSS LAST YEAR, REFLECTING WEAK VOLUMES, INVENTORY WRITE-OFFS & DOUBTFUL-DEBT PROVISIONS • FERTILIZERS REVENUE GREW 40% YOY, WHILE SEGMENT PBDIT INCREASED 25% TO ₹25 CR • MANAGEMENT ANNOUNCED A ₹145 CR INVESTMENT IN A 40 MWP SOLAR POWER PLANT AT KOTA TO SUPPORT RENEWABLE ENERGY EXPANSION • MANAGEMENT IDENTIFIED ₹60 CR FOR CEMENT PLANT FILTER PRESSES & ₹120 CR FOR CAUSTIC DEBOTTLENECKING AT BHARUCH AND KOTA • MANAGEMENT ALSO HIGHLIGHTED A ₹133 CR SPECIALTY POLYMER COMPOUNDS JV EXPANSION, WITH DCM SHRIRAM'S PLANNED EQUITY CONTRIBUTION OF UP TO ₹50 CR • PROJECT MILESTONES INCLUDE A 100 TPD ALUMINIUM CHLORIDE PLANT, PARTIAL CALCIUM CHLORIDE COMMISSIONING & HYBRID RENEWABLE POWER PROJECTS AT KOTA AND BHARUCH • MANAGEMENT INDICATED APPROXIMATELY ₹4,500 CR HAD BEEN INVESTED OVER THE PRECEDING THREE TO FOUR YEARS, WITH RETURNS DEPENDENT ON SUCCESSFUL CAPACITY RAMP-UP • KEY RISKS INCLUDE COAL & LNG INFLATION, CAUSTIC SODA OVERSUPPLY, PVC PRICE VOLATILITY, WEAK AGRICULTURAL DEMAND, FERTILIZER SUBSIDY RECEIVABLES & BIOSEED LOSSES • OVERALL OUTLOOK REMAINS CAUTIOUSLY POSITIVE FOR THE MEDIUM TERM, WITH KEY MONITORABLES INCLUDING CHEMICALS MARGIN RECOVERY, RENEWABLE POWER COMMISSIONING, PVC PROFITABILITY, BIOSEED LOSS REDUCTION & DEMERGER PROGRESS AROUND Q1 FY28
DCM SHRIRAM LIMITED