Clean Science and Technology Limited — Q1 FY26 earnings call

Call held 17 Jul 2025

Management summary

Clean Science reported a resilient Q1 FY26 amidst global volatility, achieving a record standalone EBITDA margin of over 46% despite sequential revenue declines. Established products showed strong volume growth, and new product commercialization is on track, expanding the addressable market. However, softer demand for non-established products and a moderated EBITDA growth guidance reflect the challenging operating environment. A significant promoter stake reduction was also announced for estate planning purposes.

Highlights

  • Standalone EBITDA margin of over 46% is a record high since listing.

  • Established products demonstrated robust volume-led growth of 5% sequentially and 8% annually.

  • Favorable product mix led to a significant 13% sequential and 4% annual improvement in Raw Material Cost (RMC).

  • HALS sales grew 8% sequentially to INR24 crores, driven by better volumes (580 tons).

  • Construction of Performance Chemical 1 is on track for commercialization in September 2025, with water trials expected in 4 weeks.

  • DHDT (Pharma Intermediate) has been commercialized, and samples are being sent to customers for validation.

  • Repurposing of the PBQ facility for Barbituric acid is estimated to commercialize by August end.

  • Newer, more advanced HALS grades (priced $11-$35 per kg) are planned for commercialization in the next two quarters, expected to positively impact margins.

  • The addressable market is set to expand by over $1.7 billion over the next three quarters due to new product launches.

Concerns

  • Standalone revenue decreased by 9% sequentially to INR217 crores.

  • Consolidated sales were 6% lower sequentially at INR240 crores.

  • The operating environment was marked by heightened volatility, global trade uncertainties, and geopolitical tensions, leading to extended client decision cycles.

  • Non-established products experienced slower momentum due to softer demand, though no market share loss was observed.

  • The Pharma segment (standalone) saw a 29% sequential decline.

  • EBITDA growth guidance for the year was moderated from 18-20% to 15-18% due to prevailing business conditions.

  • A faction of the promoter group (Boob family) intends to reduce their stake by 24% of the total promoter holding, bringing the total promoter stake from 75% down to 51%.

Key financials

  1. Standalone Revenue ₹217 Cr -9%QoQ
  2. Standalone EBITDA ₹101 Cr
  3. Standalone PAT ₹77 Cr
  4. Standalone EBITDA Margin 46.5%
  5. Consolidated Sales ₹240 Cr +8%YoY
  6. Consolidated EBITDA ₹100 Cr

What they filed

Q1 FY27: revenue down 5.9%, net profit down 5.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue228 232 245 220 213 −7%185 −20%197 −20%207 −6%
EBITDA95 102 105 101 92 −3%72 −29%88 −16%87 −14%
Net profit67 74 79 77 65 −3%52 −30%58 −27%73 −5%
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

  • Performance Chemicals
    74% Revenue Contribution
  • Pharma and Agro Intermediates
    16% Revenue Contribution
  • FMCG
    10% Revenue Contribution
  • HALS
    ₹24 Cr Sales580 tons Volume8% Sequential Sales Growth73% Domestic Sales Share22% Capacity Utilization

Capital allocation

high confidence
  • Capex ₹80 Cr
    • Investment in subsidiary Clean Fino-Chem Limited for Performance Chemical 1 and 2 ₹80 Cr
    • Construction of Performance Chemical 1
    • Capex for Performance Chemicals 2
    • Commercialization of DHDT (Pharma Intermediate)
    • Repurposing PBQ facility to Barbituric acid
    Clean Science invested INR80 crores during the quarter in the subsidiary Clean Fino-Chem Limited. The construction of Performance Chemical 1, which is expected to commercialize in quarter 2 is on track. The water trials for Performance Chemical 1 is expected to commence in the next 4 weeks. And commercial production to begin in September. Capex for Performance Chemicals 2 is underway, and we expect the plant to commercialize by Q4 FY '26. Regarding DHDT, the Pharma Intermediate, the plant is now commercialized, the production process is more or less stabilized and now the samples have been sent to a variety of customers for validation. Regarding another product called as Barbituric acid, we are in process to repurpose the existing facility of PBQ to convert it into barbituric acid, and this is estimated to commercialize by August end.

Guidance & targets

Volume

  • HALS Sales Target Volume · FY26 · Medium confidence INR210 crore
    Sir, I'm asking how are the HALS 944, 783 performing? Are we seeing any offtake momentum towards the INR210 crore target for FY '26 that we have got in last quarter?

    — Rehan Saiyyed

Profitability

  • HALS Advanced Grades Pricing Profitability · next 2 quarters · High confidence $11 to $35 per kg
    We are pleased to announce that over the next 2 quarters, we plan to commercialize more advanced grade of HALS priced in the range of $11 to $35 per kg. These newer HALS will positively impact the margins.

    — Siddharth Sikchi

  • EBITDA Growth Profitability · this year · Medium confidence 15-18%

    Previously 18-20% → 15-18%

    We think it could be in the range of 15% to 18%. But we'll have a little more clarity by Q2 end. Because we are also banking on DHDT stepping up, Performance Chemicals 1 starting to contribute and the higher grades of HALS to contribute. So 18% to 20% could be moderated to 15% to 18% at this stage.

    — Pratik Bora

  • HALS Breakeven Profitability · monthly run rate · High confidence INR10 crores
    HALS business will be EBITDA breakeven at monthly run rate sales of INR10 crores. We are pleased to report that we are now nearing the breakeven basis ongoing sales momentum.

    — Siddharth Sikchi

Market Expansion

  • Addressable Market Expansion Market Expansion · next 3 quarters · High confidence over $1.7 billion
    In terms of growth driver, with commercialization of newer launches, including HALS, Performance Chemicals 1, Performance Chemical 2, the addressable market is set to expand by over $ 1.7 billion over the next 3 quarters.

    — Siddharth Sikchi

Shareholding

  • Promoter Stake Shareholding · High confidence 51%

    Previously 75% → 51%

    The total promoter stake from 75% will go down to 51%. The difference of 24% will be sold by a faction of the Boob family.

    — Siddharth Sikchi

What to watch in Q2 FY26

Performance Chemical 1 Commercialization

September 2025
Current Construction on track, water trials in 4 weeks
Target Commercial production begins

Why it matters

Successful commercialization is a key growth driver and will expand the addressable market.

The construction of Performance Chemical 1, which is expected to commercialize in quarter 2 is on track. The water trials for Performance Chemical 1 is expected to commence in the next 4 weeks. And commercial production to begin in September.

Risks & concerns

  • Global trade uncertainties and geopolitical tensions

    medium

    Operating environment marked by heightened volatility, leading to extended client decision cycles.

    Management acknowledged

  • Softer demand for non-established products

    medium

    Non-established products saw slower momentum due to softer demand, particularly in China and Europe.

    Management acknowledged

  • Moderation of EBITDA growth guidance

    medium

    EBITDA growth guidance for FY26 revised from 18-20% to 15-18% due to prevailing business conditions.

    Management acknowledged

  • Potential for finished product price reduction

    medium

    If raw material prices correct in the future, finished product prices might need to be reduced, which is a general trend.

    Management acknowledged

Q&A highlights

8 direct
Promoter stake reduction and its implications Direct
So the basic plan is some fraction of the Boob family are exiting part of their equity. I am not selling a single share, and the business will remain as usual. And I think -- I mean, anything more or I think this is what it is. ... The total promoter stake from 75% will go down to 51%. The difference of 24% will be sold by a faction of the Boob family. ... Absolutely, absolutely. From the Boob family.

This question clarified the significant reduction in promoter shareholding, confirming it's for estate planning by a specific family faction and not impacting the current management or business operations.

Asked by Abhijit Akella

Revision of EBITDA growth guidance for FY26 Direct
We think it could be in the range of 15% to 18%. But we'll have a little more clarity by Q2 end. Because we are also banking on DHDT stepping up, Performance Chemicals 1 starting to contribute and the higher grades of HALS to contribute. So 18% to 20% could be moderated to 15% to 18% at this stage.

Management revised down its full-year EBITDA growth guidance, indicating a more cautious outlook due to current business conditions, while still expecting contributions from new projects.

Asked by Abhijit Akella

HALS performance and target for FY26 Direct
Yes. I mean the volume for 944 and 783 during this quarter was encouraging. In fact, we have seen a good volume mix contribution coming from these 2 projects also. ... So we are trying to maintain that number. In fact, by the newer HALS, which we are trying to introduce, which are more expensive and which we feel will be able to help us to complete the number which we have stated in the last call. So as of now, we are holding to that statement.

Analysts questioned the HALS momentum towards the INR210 crore FY26 target given Q1 run rate, and management reaffirmed the target, banking on newer, more expensive HALS grades.

Asked by Rehan Saiyyed

Commercialization and feedback for new Performance Chemicals Direct
The pharma plant I mentioned, Ankur, the pharma plant, which we started has now the samples have been going out to the customers. The Performance Chemical 1, where the water trials will begin in the next 3 weeks' time, then the plant will start, the production will come and then the samples will go out to the customer because customers would be keen to test the commercial sample, not the lab or pilot samples.

This provided an update on the progress and timelines for new product commercialization, including Performance Chemical 1 and the DHDT pharma intermediate, which are key growth drivers.

Asked by Ankur Periwal

Capacity utilization across product categories Direct
We would like to mention capacity utilization across segments rather than products. So Performance and FMCG are in the range of 75-odd percent. Pharma is around 68%. And HALS is around 22% for the quarter gone by.

This provides insight into the operational efficiency and potential headroom for growth in different segments, highlighting the low utilization in HALS despite its growth potential.

Asked by Rehan Saiyyed

Demand softness for non-established products and geographical trends Direct
So these are products like DCC, TBHQ, vereitraol, corbil palmitate. So here, there was just a little slower demand in this quarter. ... China is very slow. Europe is slow. China, Europe and United States was still dabbling between the tariff tensions, so that has also been a little slow.

Management acknowledged slower demand for non-established products and identified specific geographies (China, Europe) experiencing softness, providing context for overall business performance.

Asked by Sanjesh Jain

Competition in HALS and strategy to compete Direct
The real competitor in China is Suqian please note that it's English name is Unitechem. So that is a major competitor for all the HALS producers, not just to us, but for all the players. What are we trying to do is, A, of course, trying to increase our yield efficiencies, which is happening as we speak because as and when our plant is running more capacities are coming up, whatever we are understanding for them from this process, the yield is improving, which will help us to compete. Secondly is we are trying to diversify into more complex products.

Management clarified the true competitive landscape in HALS and outlined its strategy focusing on yield efficiencies and diversifying into more complex, higher-margin products to maintain competitiveness.

Asked by Jason Soans

HALS breakeven run rate Direct
Absolutely. Just to clarify, we just not have any -- I mean, if we attain a revenue of INR10 crores, we will do a breakeven in the subsidiary. ... Of course, monthly, monthly.

This clarified the specific monthly sales figure required for the HALS subsidiary to achieve EBITDA breakeven, providing a clear operational target.

Asked by Jason Soans

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Detailed narrative

Q1 FY26 Performance Overview Amidst Volatility

Clean Science reported a challenging Q1 FY26 marked by heightened global volatility and extended client decision cycles. Standalone revenue decreased by 9% sequentially to INR217 crores, with consolidated sales also down 6% sequentially to INR240 crores. Despite this, the company achieved a record high standalone EBITDA margin of over 46% and a consolidated EBITDA of INR100 crores, implying a 42% margin. The Pharma segment experienced a 29% sequential decline, while non-established products faced softer demand.

Product Mix and Margin Expansion

A favorable product mix was a key driver for margin expansion in Q1 FY26. Established products contributed 83% to standalone sales, up from 75% in Q4 FY25 and 80% in Q1 FY25. This shift led to a significant 13% sequential and 4% annual improvement in Raw Material Cost (RMC). The highest ever standalone EBITDA margin of over 46% was attributed to this product mix, where established products generally have better margins than non-established ones.

New Product Commercialization and Capex Update

Clean Science invested INR80 crores in its subsidiary, Clean Fino-Chem Limited, during Q1. The construction of Performance Chemical 1 is on track for commercialization in September 2025, with water trials expected in the next four weeks. Capex for Performance Chemical 2 is also underway, targeting commercialization by Q4 FY26. The Pharma Intermediate DHDT has been commercialized, and samples are being sent for validation. Additionally, the company is repurposing its PBQ facility to produce Barbituric acid, with commercialization estimated by August end.

HALS Business Performance and Strategy

The HALS business saw an 8% sequential increase in sales, reaching INR24 crores with a volume of 580 tons in Q1. Domestic sales accounted for 73% of HALS revenue. Management reiterated its FY26 target of INR210 crores for HALS, banking on the introduction of newer, more expensive grades (priced $11-$35 per kg) in the next two quarters to boost margins. The company also clarified that its HALS subsidiary is nearing EBITDA breakeven at a monthly run rate of INR10 crores in sales.

Market Conditions and Outlook

The company noted a challenging global market with heightened volatility, trade uncertainties, and geopolitical tensions, leading to extended client decision cycles. China and Europe were particularly slow. While established products maintained momentum, non-established products experienced softer demand. The EBITDA growth guidance for FY26 was moderated from 18-20% to 15-18%, reflecting these conditions, though management expects contributions from new launches to support growth.

Promoter Shareholding Update

A significant update regarding promoter shareholding was provided: a faction of the Boob family intends to reduce their stake. The total promoter stake, currently at 75%, will decrease to 51%, with the 24% difference being sold by this family faction. Management clarified that this is for estate planning purposes and will not affect the company's business operations or the involvement of the current management.

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