Cosmo First — Q1 FY26 earnings call

Call held 14 Aug 2025

Management summary

Cosmo First delivered a strong Q1 FY26 with significant revenue and EBITDA growth, driven by higher volumes and improved BOPP margins. The commissioning of new BOPP and window film lines marks a major capacity expansion. While facing challenges from high US tariffs and temporary BOPP imports, the company remains focused on specialty products, cost rationalization, and sustainability initiatives.

Highlights

  • Consolidated sales increased by 16% YoY to ₹800 crores, driven by 19% higher volume and better BOPP margins.

  • EBITDA rose to ₹116 crores from ₹84 crores YoY, an improvement backed by higher volume, better BOPP margins, ₹4 crores in cost rationalization, and ₹4 crores enhanced performance from specialty chemicals.

  • New BOPP line with 81,000 metric tons annual capacity started operations in June, adding 45% to BOPP capacity, expected to ramp up to 100% utilization within 2-3 months and add ₹750 crores revenue at full capacity.

  • Window film line under 'Sunshield' brand started operations in May 2025, gaining momentum with over 50 distributors.

  • Specialty chemical business achieved record EBITDA of ₹12 crores on quarterly sales of ₹49 crores, demonstrating continued traction and growth.

Concerns

  • High tariffs of 55% on exports to USA could impact up to 50% of the business, though management expects duties to normalize.

  • Temporary BOPP imports in July/August caused by traders anticipating higher prices, expected to sort out in 30-45 days.

  • Zigly's online sales were negatively impacted in the quarter due to omni-channel implementation issues leading to marketplace cancellations, despite strong retail growth.

Key financials

  1. Consolidated Sales ₹800 Cr +16%YoY
  2. EBITDA ₹116 Cr +38.1%YoY
  3. BOPP Film Margin ₹25/kg +31.6%YoY

What they filed

Q1 FY27: revenue up 41.0%, net profit up 0.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue723 679 687 751 873 +21%820 +21%911 +33%1,059 +41%
EBITDA67 55 59 72 81 +21%50 −9%94 +59%101 +40%
Net profit33 22 17 30 29 −12%17 −23%30 +76%30 +0%
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

  • Specialty Chemical
    ₹12 Cr EBITDA₹49 Cr Sales
  • Others (Sunshield & Rigid Packaging)
    ₹25 Cr Reported Turnover
  • Zigly (Pet Care)
    ₹16 Cr GMV

Capital allocation

medium confidence
  • Capex Capex disclosed
    As the CAPEX plan for this year, although there is a reasonable number, but for the next year there is no major CAPEX plan, so we see a very significant reduction in the net debt level over the next two years or so.
  • Debt Net ₹1,140 Cr
    So, we are at Rs.1140 crore of the net debt. But we also expect this to be close to the peak level. As the CAPEX plan for this year, although there is a reasonable number, but for the next year there is no major CAPEX plan, so we see a very significant reduction in the net debt level over the next two years or so.

Guidance & targets

Capacity

  • New BOPP line capacity utilization Capacity · within the next two to three months · High confidence 100%
    The new BOPP line will ramp up to 100% capacity within the next two to three months. We will be filling up with specialty films over a period of time. So, our objective is again to have more specialty mix even from the new line.

    — Management

  • Debottlenecking impact on older lines Capacity · over the coming quarters · Medium confidence 6-7% more production
    The company is running a total quality management project. And we do expect that our earlier lines will be able to do 6%, 7% more production over the coming quarters.

    — Management

Revenue

  • New BOPP line revenue potential Revenue · when running at full capacity · High confidence ₹750 crores
    This new line can add close to Rs.750 crores of revenue, when it is running at full capacity.

    — Management

  • Rigid packaging breakeven sales Revenue · High confidence ₹25 crore
    Yes, you are right. We should be breaking even at Rs.25 crore roughly, sales number.

    — Management

  • Annual sales from current rigid packaging assets Revenue · annual · High confidence ₹130-160 crores
    And beyond that, start making positive EBITDA on those sales, from the current set of assets that we have we should be able to do an annual sale of anywhere between Rs.130 to Rs.160 crores.

    — Management

Profitability

  • Rigid packaging positive EBITDA Profitability · September/October · High confidence Positive EBITDA
    What we expect is that the rigid packaging should start making positive EBITDA. Let's say in September month of most likely in September month, it could be September or October.

    — Management

  • Rigid packaging positive PBT Profitability · within Quarter 3 or Quarter 4 · High confidence Positive PBT
    And we expect that Quarter 3 should have positive EBITDA coming from rigid packaging. And within Quarter 3 or Quarter 4, we should start making a positive profit before tax also in the rigid packaging business.

    — Management

  • Zigly old stores profitability Profitability · by December · Medium confidence making money
    So, we expect that by December, some old stores should start making money.

    — Management

  • Zigly two-year-old centers profitability Profitability · by Quarter 4 latest · Medium confidence making money
    So, most of the two-year-old centers we do expect that they will start making money by Quarter 4 latest.

    — Management

  • Q2 EBITDA outlook Profitability · Q2 · Medium confidence better
    Sure, Q1 EBITDA is better, largely for the two factors, as we indicated at the beginning of the call, increase in volume and better margins. Based on this Q2 it should be better.

    — Management

Cost

  • Incremental fixed cost for new BOPP line Cost · in a year · High confidence ₹6-8 crores
    So, we do not expect that the incremental fixed cost because of this new line will be more than Rs.6 to Rs.8 crores in a year.

    — Management

  • Cost reduction target Cost · this year · High confidence ₹40 crore
    The last year we saved around Rs.40 crores on cost reduction exercises. So, this year also we are targeting to achieve Rs.40 crore cost reduction.

    — Management

Sustainability

  • Renewable power consumption Sustainability · in one to two years period · Medium confidence two-thirds
    In FY'25 company has used more than 50% of its power consumption from renewable sources, which we expect to further increase to about two third in one to two years period.

    — Management

Sales Growth

  • Specialty sales growth Sales Growth · coming years · Medium confidence 10%
    The company's specialty sales have increased by 10% in FY'25 and the similar trend we expect in the coming years as well, which further strengthens the business model.

    — Management

What to watch in Q2 FY26

New BOPP line capacity utilization & specialty mix

next two to three months
Current Started operations in June, adding 45% capacity
Target 100% capacity utilization with increasing specialty mix

Why it matters

Verifies the successful ramp-up of significant new capacity and the strategic shift towards higher-margin products.

The new BOPP line will ramp up to 100% capacity within the next two to three months. We will be filling up with specialty films over a period of time. So, our objective is again to have more specialty mix even from the new line.

Risks & concerns

  • High tariffs on exports to USA

    high

    Current 55% tariffs on exports to USA could impact 50% of the business, though management expects duties to normalize to 15-20%.

    Management acknowledged

  • Temporary BOPP imports

    medium

    Temporary BOPP imports in July/August by traders are causing short-term market disruption but are expected to resolve within 30-45 days as traders incur losses.

    Management downplayed

  • Zigly online sales disruption

    medium

    Zigly's online sales were negatively impacted by marketplace cancellations due to omni-channel implementation issues, despite strong retail growth.

    Management acknowledged

Q&A highlights

6 direct, 1 evasive
BOPP line product mix strategy and ramp-up Direct
The new BOPP line will ramp up to 100% capacity within the next two to three months. We will be filling up with specialty films over a period of time. So, our objective is again to have more specialty mix even from the new line.

Clarifies the timeline for full utilization and strategic focus on higher-margin specialty films for the new capacity.

Asked by Rehan Saiyyed

Zigly demerger timeline and partner strategy Partial
Yes, so we must scale up to a certain level before we even decide whether we want any financial or strategic player. We are bringing very sound business principles. I feel that it's very difficult to assess at this stage what time we will bring, but more than likely it will be anywhere by latest by 2028, or 29 it can happen even earlier than that, but it's too early to predict anything on this.

Provides a broad timeline for Zigly's potential demerger (2028-29) and indicates a focus on scaling the business before seeking external partners, suggesting no immediate demerger or partner induction.

Asked by Rehan Saiyyed

BOPP industry dynamics and impact of competitor's capacity being out Direct
So, on a net basis, right now the reduction is 3000 to 4000 tons of capacity. Right now, the entire capacity is utilized. India is right now sitting at 65,000 to 70,000 tons of domestic consumption. And India is doing exports of close to 15,000 tons, of which Cosmo is by far the largest player in exports.

Provides crucial context on the current supply-demand situation in the Indian BOPP market following a competitor's capacity reduction and new capacity additions, highlighting Cosmo's strong export position.

Asked by Gaurav

Window films/rigid packaging breakeven and profitability Direct
As far as the Cosmo consumer vertical is concerned, the paint protection film is already making profit without the fixed overheads. Fixed overheads have to be obviously allocated to all three businesses. So, majority of the losses are actually coming from the marketing costs that we have already started incurring, and the employee costs.

Explains the current loss drivers in the new consumer vertical (marketing and employee costs) and provides a clear path to profitability for rigid packaging by Q3/Q4.

Asked by Nirav Jimodia

USA tariffs impact on exports Direct
See, the current tariffs are quite crazy, and what we feel are unsustainable, if it remains at the current level, then it is a precarious position. A significant part of our sales can be impacted to America. Last year, we had done close to Rs.250 crores to Rs.280 crores of sales, and so we may have to shift that sales to other markets if it has to continue at 55%, but what we feel is that better sense will prevail, and these will come to more realistic levels.

Highlights a significant risk to a large portion of export sales to the US due to high tariffs, indicating potential market shifts if tariffs persist.

Asked by Nirav Jimodia

BOPP margins, imports, and BIS standards Direct
Now, these traders are struggling because they are not making those margins that they had expected, many of them will have to sell their inventory at a significant loss. Having said so, this should be a temporary phenomenon, because traders have really understood that companies are here not to make extraordinary margins, but reasonable margins. And therefore, we feel that, yes, there is a temporary import which happened in the month of July. It may happen, some of this may land even in August, but this should get sorted out in next 30 to 45 days, and the market will be back to normal.

Addresses concerns about temporary BOPP imports and their impact on margins, reassuring that the situation is temporary and market fundamentals will prevail.

Asked by Aman Kumar

Zigly store count and profitability Direct
Some centers have started making money, but we then increased the vet care in all the centers, due to which you can understand that vets had a higher salary compared to other staff. So, we expect that by December, some old stores should start making money. Normally, the fundamentals of retail are that they typically tend to make money in the third year, there was fortunately an article in Economic Times even today, that stoke about it. And we hardly have three, four centers which are effectively more than two years old. So, most of the two-year-old centers we do expect that they will start making money by Quarter 4 latest.

Provides specific timelines for Zigly's older stores to achieve profitability (December for some, Q4 for two-year-old centers), offering clarity on the path to breakeven for the pet care venture.

Asked by Amit Agarwal

Shareholder name (new entry) Evasive
Well, no comment on this. This is more a question for the investor.

Management declined to comment on a new shareholder, leaving questions about potential strategic implications unanswered.

Asked by Abhijit

3 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview

Cosmo First reported a strong Q1 FY26, with consolidated sales reaching ₹800 crores, marking a 16% year-on-year increase. This growth was primarily fueled by a 19% rise in volume and improved BOPP film margins. The company's EBITDA for the quarter also saw a significant jump to ₹116 crores, up from ₹84 crores in the corresponding period last year. This improvement was attributed to higher volumes, better BOPP margins, ₹4 crores in cost rationalization, and an additional ₹4 crores from enhanced performance in the specialty chemical subsidiary.

New Capacity Commissioning and Outlook

The company successfully commissioned two key assets in Q1 FY26. A new BOPP line with an annual capacity of 81,000 metric tons began operations in June, increasing the company's BOPP capacity by 45%. This line is expected to ramp up to 100% utilization within the next two to three months and contribute approximately ₹750 crores in revenue at full capacity, with a strategic focus on specialty films. Additionally, a new window film line under the 'Sunshield' brand commenced operations in May 2025, quickly gaining traction with over 50 distributors.

Specialty Chemicals and Pet Care (Zigly) Update

The specialty chemical business continued its strong performance, posting a record EBITDA of ₹12 crores on quarterly sales of ₹49 crores in Q1 FY26, and is expected to maintain its growth trajectory. The pet care venture, Zigly, is poised for higher momentum in FY26, shifting its business model towards high-margin services and house brands. While some centers have started making money, the company anticipates older stores to achieve profitability by December, and two-year-old centers by Q4 latest, following initial investments in vet care and staffing.

BOPP Market Dynamics and Import Concerns

The Indian BOPP market saw a net reduction of 3,000-4,000 tons in capacity due to a competitor's exit, leading to full capacity utilization across the industry. India's domestic consumption stands at 65,000-70,000 tons, with exports around 15,000 tons, where Cosmo First is a major player. Management noted a temporary surge in BOPP imports in July/August by traders anticipating higher prices, but expects this situation to normalize within 30-45 days as these traders face losses, reaffirming that such imports are generally unprofitable due to customs duties and logistics costs.

Capital Structure and Debt

As of June 30, 2025, Cosmo First's net debt stood at ₹1140 crores, an increase of ₹200 crores from March. This rise is attributed to the significant BOPP capacity addition and related working capital requirements. However, management expects this to be near the peak level, projecting a significant reduction in net debt over the next two years, as there are no major CAPEX plans for the upcoming fiscal year. The company aims to reduce its debt burden through operational cash flows.

Export Market Challenges and Sustainability Initiatives

The company faces a significant challenge in its export markets, particularly the USA, where current tariffs of 55% could impact up to 50% of its business, which generated ₹250-280 crores in sales last year. Management hopes for a reduction in these duties to a more realistic 15-20% range. On the sustainability front, Cosmo First is committed to increasing its renewable energy usage, aiming for two-thirds of its power consumption from renewable sources within one to two years, up from over 50% in FY25, alongside other cost rationalization efforts targeting ₹40 crores in savings this year.

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