DCM Shriram Q1 FY26 earnings call

DCM Shriram reported a strong Q1 FY26 with net revenues increasing 13% YoY to ₹3,262 crores, up from ₹2,876 crores last year. PBDIT also grew significantly by 19% YoY to ₹326 crores, compared to ₹274 crores in Q1 FY25. This performance was achieved amidst a challenging global economic environment marked by lower growth projections and geopolitical instability. However, India demonstrated resilience driven by robust domestic demand and government support for infrastructure and manufacturing.

The Chemicals segment was a primary growth engine, with revenue increasing 43% YoY and PBDIT surging 68% YoY. This strong performance was largely attributed to a 20% increase in Caustic Soda volumes, driven by the new 850 TPD facility commissioned in May 2024, coupled with lower input prices and enhanced efficiencies from the 120-Megawatt power plant. Despite global oversupply and price pressure in caustic soda and chlorine, the company is actively ramping up hydrogen peroxide capacity utilization from 65% towards a target of over 80% this year. The ECH plant's trial runs have commenced, with commissioning expected within the current quarter and capacity ramp-up in subsequent quarters.

The Vinyl business experienced flat revenue at ₹209 crores in Q1 FY26, compared to ₹211 crores in the previous year, primarily due to a 17% decline in PVC prices. Global PVC demand remained subdued, and surplus exports from China continued to negatively impact Indian prices. The company anticipates potential relief from the ongoing anti-dumping investigation by DGTR, which, if imposed, could lead to a price increase of ₹6-7 per kg and improve EBITDA margins to 10-11% from the current 7%.

The Sugar and Ethanol business faced significant headwinds, resulting in a 14% YoY decline in revenue (net of excise duty) and a negative PBDIT of ₹-7 crores, a sharp contrast to the positive ₹37 crores last year. This downturn was largely due to a one-time^📎 provision of ₹36 crores for retrospective export duties on ethanol levied by the UP government since 2018, which the industry is actively challenging through legal recourse. Additionally, domestic sugar volumes were lower by 23% due to reduced offtake.

Fenesta Building Systems reported a healthy 21% YoY revenue growth, although PBDIT remained similar to last year due to higher fixed expenses, increased marketing, and acquisition-related costs. The Agri-Input businesses demonstrated robust performance: Shriram Farm Solutions' revenue increased 29% YoY (PBDIT +22%), and Bioseed's revenue grew 30% YoY (PBDIT +46%), driven by volume expansion, better margins, and a broader hybrid seed range. The Fertilizers segment also saw a 19% revenue increase and 65% PBDIT growth, benefiting from higher volumes and improved energy efficiency.

DCM Shriram's net debt stood at ₹1,481 crores as of June 30, 2025, a slight increase from ₹1,459 crores last year. The planned organic CAPEX for FY26 is projected to be in the range of ₹600-700 crores, with approximately ₹300 crores allocated for aluminum chloride and calcium chloride capacities, and ₹100 crores for aluminum extrusion. The company made strategic acquisitions, including Hindustan Specialty Chemicals (Epoxy) and a 53% stake in DNV Global Private Limited (hardware), aligning with its strategy to grow into adjacencies and strengthen its presence across diverse businesses.

The acquisition of Hindustan Specialty Chemicals marks DCM Shriram's strategic entry into advanced materials and epoxy resin segments. Management anticipates the Indian epoxy market to grow significantly, from 200 kilotons to 300 kilotons per annum in the next 3-4 years, and plans to substantially expand its own capacities, with an intention to almost triple them. The company highlights the strategic advantage of backward integration, including captive chlorine consumption (expected to be roughly 70% of total post-expansions) and internal ECH production, to optimize costs and position itself competitively in both domestic and global markets.