Century Enka Limited — Q1 FY26 earnings call

Call held 4 Aug 2025

Management summary

Century Enka reported a challenging Q1 FY26 with significant declines in revenue, EBITDA, and PAT, primarily due to lower demand, increased imports from China, and a slowdown in the automobile sector. Volumes were also impacted by a fire at the Bharuch plant, which has since resumed full operations. The company is focusing on efficiency improvements and expects demand recovery in the coming quarters, particularly for NTCF and in the second half of the fiscal year.

Highlights

  • Bharuch plant resumed full operations from June '25 after fire incident.

  • Use of renewable energy at Bharuch plant helped control power costs.

  • Management expects NTCF demand to improve in Q2 following inventory adjustments by tyre manufacturers.

  • Anticipates better demand in the second half of FY26 supported by festive season and positive monsoon impact on farm income.

Concerns

  • Operating revenue declined almost 24% YoY to INR 402 crores.

  • EBITDA declined 52% YoY to INR 20 crores, with EBITDA margin at 4.96%.

  • PAT declined almost 37% YoY to INR 15 crores, with PAT margin at 3.84%.

  • Total volume declined 17% YoY to 17,072 metric tons, impacted by lower demand and higher imports from China.

  • Caprolactam prices continue to decline to record low levels, resulting in margin pressure.

Key financials

  1. Operating Revenue ₹402 Cr -24%YoY
  2. EBITDA ₹20 Cr -52%YoY
  3. EBITDA Margin 5%
  4. PAT ₹15 Cr -37%YoY
  5. PAT Margin 3.8%
  6. Total Volume 17,072 metric tons -17%YoY

What they filed

Q1 FY27: revenue up 37.8%, net profit up 306.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue536 493 444 402 409 −24%412 −16%484 +9%554 +38%
EBITDA38 27 9 20 32 −16%41 +52%55 +511%86 +330%
Net profit22 14 7 15 23 +5%24 +71%40 +471%61 +307%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹374 Cr Total
  • Filament Yarn ₹193 Cr 51.6%
  • Tyre Cord Fabrics ₹181 Cr 48.4%

Capital allocation

medium confidence
  • Liquidity Cash ₹325 Cr Analyst mentioned net surplus cash of over INR 3.25 billion (325 crores).
    Okay, sir. And also, sir, like with a net surplus cash of over like INR3.25 billion and improving cash generation, what is the capital allocation framework for FY '26?

Guidance & targets

Profitability

  • EBITDA Margin Profitability · normally · Medium confidence 6% to 8%
    the more likely margins that we commit or we target normally is between 6% to 8%.

    — Suresh Sodani, Managing Director

  • PTCF EBITDA Margin Profitability · ongoing · Medium confidence 6% to 8%
    Similar. I mean when we say it's similar for the company, between 6% to 8%.

    — Suresh Sodani, Managing Director

Revenue

  • Revenue from new capacity Revenue · at full capacity · Medium confidence INR 100 crores to INR 120 crores
    From our new capacity, it could be between -- at the full capacity between INR100 crores to INR120 crores.

    — Suresh Sodani, Managing Director

Volume

  • NTCF Demand Volume · annualized · Medium confidence 125 kt to 135 kt
    So NTCF demand fluctuates between 125 to 135 kt, sometimes even slightly plus/minus 5 kt on an annualized basis, but could vary significantly on a quarter-to-quarter basis, mainly because of changes in the replacement demand position. NTCF is not falling significantly, but also not growing. So more or less flat. We do expect a small increase driven by the Farm segment and the 2, 3-Wheeler segment. But that should be the range in which it should be there.

    — Suresh Sodani, Managing Director

  • PTCF Demand Growth Volume · ongoing · Medium confidence 6% to 8%
    The PTCF demand is about 30 to 35 kt. Again, this is annualized demand. And that is expected to grow by 6% to 8% on the premise that the car industry and the 4-wheeler industry, particularly is doing well and should continue to do well, though the last few quarters have been not that great.

    — Suresh Sodani, Managing Director

  • NFY Demand Growth Volume · ongoing · Medium confidence 6% to 8%
    And in terms of NFY, the demand, I mean, there's no clear numbers because of the wide variety of NFY that is there, but it is anything between 160 kt to 180 Kt, but it is also growing at about 6% to 8% based on changes in the end-use segments of NFY mainly from the fashion side.

    — Suresh Sodani, Managing Director

What to watch in Q2 FY26

NTCF Demand Improvement

next quarter
Current Impacted by lower demand and imports in Q1 FY26
Target Improvement in Q2 FY26

Why it matters

Recovery in NTCF demand is crucial for volume growth and overall business performance, especially after a challenging Q1.

However, we expect NTCF demand to improve in Q2 following inventory adjustments by tyre manufacturers.

Risks & concerns

  • Higher imports from China

    high

    Impacting volumes and prices in Tyre Cord Fabric and Filament Yarn segments, leading to competitive pressure. Company is engaging with government for policy interventions.

    Management acknowledged

  • Declining caprolactam prices

    high

    Prices at record low levels, resulting in margin pressure due to inventory valuation.

    Management acknowledged

  • Significant overcapacity across the value chain

    high

    From raw materials to finished products, impacting margins not only in India but also in the Chinese domestic market.

    Management acknowledged

  • Geopolitical and trade tensions

    medium

    Indirect impact on end products (tyres, garments) if tariffs or levies affect exports to US and other countries.

    Management acknowledged

  • Slowdown in automobile industry

    medium

    Particularly in 2-wheeler and commercial vehicle segments, impacting NTCF demand.

    Management acknowledged

  • Volatile global situation and uncertainties

    medium

    Difficult to predict market bottom or margin improvement due to geopolitical challenges and tariff issues affecting domestic production and exports.

    Management acknowledged

Q&A highlights

5 direct
Impact of geopolitical and trade tensions on operations Partial
We could have an impact if these end products are impacted due to the tariff or other kinds of levies due to particularly the differential levies between India and other countries. So we still keep a watch on what actually comes out. And that is the indirect impact that could be having of the geopolitical situation on our operations.

Highlights the indirect risks from global trade dynamics on the company's end-user industries like tyres and garments.

Asked by Param Vora

Mitigating competitive pressure from Chinese imports and policy interventions Direct
Through our association, we have raised this issue of our imports from China and also from the free trade agreement countries where the duty protection is not available. And we have raised this issue in terms of asking one is for either initiating immediately the QCO process so that, first of all, substandard material does not come. And second, only valid and approved sources of producers in the other countries are allowed to send material to India.

Reveals specific actions taken by the company through industry associations to address unfair competition from imports.

Asked by Param Vora

EBITDA margin decline, inventory losses, crude oil correlation, and path to 10% margins Partial
Yes, our margins are lower than the target between 6% to 8% for this quarter and also for the previous quarter. As regards to the impact of falling prices, yes, this do impact our margins because the materials, the stock in hand right from raw material up to finished goods, the prices get corrected when there is a change in the underlying raw material prices.

Explains the impact of falling raw material prices on margins due to inventory valuation and clarifies the company's normal target margin range.

Asked by Gunit Singh

Revenue run rate post-fire, rationale for new capacity amidst oversupply, and peak revenues from new capacity Direct
As far as the capacity expansion is concerned, our capacity expansion and which is still not commissioned is related to polyester tyre cord. And the purpose of getting into that segment is that we didn't have presence in the polyester tyre cord, which is used in passenger car tyres.

Clarifies the strategic rationale behind new capacity expansion, targeting a growing segment (polyester tyre cord) where the company previously had no presence.

Asked by Gunit Singh

Current demand scenario, outlook for FY26, and reasons for inventory buildup Partial
Okay. So from demand side, we do expect some improvement in demand. I mean, difficult to comment for the balance 3 quarters in this scenario to say that on an overall basis, whether it will be better or worse than FY '25. But demand is expected to be better, as mentioned in our presentation on two factors. One is the festive season normally leads to more demand, particularly from farm and the 2-wheeler segments.

Provides insights into expected demand recovery drivers for the rest of the fiscal year and explains the temporary nature of inventory buildup.

Asked by Gunit Singh

Capital allocation framework for FY26 and potential for higher payout ratios or strategic investments Direct
The focus is on getting more strategic investments and grow this company. But anyway, the payout is more call to be taken out by the Board, and we can only recommend but the final and it has already been for the year being given out in terms of the dividend.

Outlines the company's capital allocation priority towards strategic investments for growth, while dividend decisions remain with the Board.

Asked by Parth Patel

Pricing strategy for caprolactam and pass-through mechanisms with customers Direct
Yes. In case of Tyre Cord Fabrics, there is a pass-through mechanism for the raw material prices. And that has been continuing for many years in the past and continues in the current year as well. As far as the Filament Yarn is concerned, ultimately, there is a pass-through, but it may not be in terms of time lines or in terms of quantum because it is also a function of the demand supply and the imports coming in from China.

Differentiates the pricing power and pass-through capabilities between the Tyre Cord Fabrics and Filament Yarn segments.

Asked by Khushi

Demand and supply scenario in India for NTCF, PTCF, and NFY, and price differential compared to Chinese imports Direct
So NTCF demand fluctuates between 125 to 135 kt... The PTCF demand is about 30 to 35 kt... in terms of NFY, the demand... is anything between 160 kt to 180 Kt... So on with the duty paid, it is almost matching. There could be a few -- because the pricing is also an annualized pricing formula based.

Provides a comprehensive overview of demand, supply, and pricing dynamics across the company's key product segments relative to imports.

Asked by Gunit Singh

2 min read 5 chapters

Detailed narrative

Q1 FY26 Financial Performance Overview

Century Enka reported a significant decline in its Q1 FY26 financial performance. Operating revenue stood at INR 402 crores, marking an almost 24% year-on-year decrease. EBITDA for the quarter was INR 20 crores, a 52% year-on-year decline, resulting in an EBITDA margin of 4.96%. Profit after tax (PAT) was INR 15 crores, down almost 37% year-on-year, with a PAT margin of 3.84%. Total sales volume also decreased by 17% year-on-year to 17,072 metric tons.

Segmental Performance and Market Dynamics

The Tyre Cord Fabrics segment saw its revenue decrease by approximately 35% year-on-year to INR 181 crores, primarily due to lower demand from the tyre industry and increased imports from China. The Filament Yarn segment's revenue also declined by around 15% year-on-year to INR 193 crores, impacted by a fire at the Bharuch plant in February 2025. However, the Bharuch plant resumed full operations from June 2025, and management expects NTCF demand to improve in Q2.

Raw Material and Margin Pressure

Caprolactam prices, a key raw material, continued to decline to record low levels, contributing to margin pressure. The company noted that falling prices impact margins due to the valuation of existing stock. While there is a correlation with crude oil prices, it is not always direct or immediate. The management highlighted that the normal target EBITDA margin for the company is between 6% to 8%, which was not achieved this quarter.

Capacity Expansion and Capital Allocation

The company's ongoing capacity expansion is focused on polyester tyre cord, a segment used in passenger car tyres where Century Enka previously had no presence. This segment is expected to grow faster than nylon tyre cord. The new capacity is projected to generate INR 100-120 crores in revenue at full utilization. Most large capex projects were completed by March 2025, with current investments primarily for cost reduction, balancing equipment, and energy conservation. The company's capital allocation strategy prioritizes strategic investments for growth.

Geopolitical and Trade Tensions Impact

Geopolitical and trade tensions, along with tariff-related uncertainties, remain a key risk. While the company has little direct export exposure to the US, indirect impacts could arise if end products like tyres and garments are affected by tariffs. Century Enka is actively engaging with government bodies through associations to address competitive pressures from imports, advocating for a Quality Control Order (QCO) process and a minimum import price for Tyre Cord Fabrics to ensure fair competition and prevent substandard material entry.

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