DCM Shriram

The Chemicals business was the primary growth engine this quarter, with revenue jumping 35% YoY. This was supported by a 21% increase in Caustic Soda volumes following the commissioning of the new 850 TPD facility. Despite an oversupply of chlorine in the Indian market creating pressure on product prices, the segment's PBDIT grew by 90% due to lower energy costs from the new 120 MW power plant and improved efficiencies. Management expects to reach 90-100% capacity utilization in this segment over the next 12-18 months as downstream projects like ECH and Aluminum Chloride ramp up.

The Sugar and Ethanol segment saw PBDIT drop to ₹113 crore from ₹188 crore in the previous year. This decline was attributed to a higher State Advised Price (SAP) for sugarcane and lower recovery rates caused by the 'red rot' disease affecting the popular 238 cane variety. While ethanol volumes and prices were up 6% and 12% respectively, they were not enough to offset the higher cost of production in the sugar business. Management is looking toward the upcoming Compressed Bio Gas (CBG) project, expected in Q4 FY25, to provide a new revenue stream for this segment.

The Agri-Inputs portfolio, comprising Shriram Farm Solutions and Bioseed, performed exceptionally well. SFS revenue grew 19% YoY, bolstered by a leadership position in research wheat, where volumes grew from 76,000 tons to approximately 96,000 tons. Bioseed revenue increased 22% with a 76% jump in PBDIT, driven by higher acreage of corn and paddy. Management remains optimistic about the Rabi season, citing robust demand and a strong product pipeline based on their 'Better Science' principle.

Fenesta Building Systems continues to expand its footprint, reporting a 33% growth in its order book. To drive backward integration and improve customer experience, the board approved a ₹65 crore investment in the hardware business. Additionally, a new aluminum extrusion facility is progressing on schedule to bolster the aluminum windows business, which is currently growing faster than UPVC. While EBITDA margins dipped slightly to 19% due to increased marketing and brand-building spend, management views this as a necessary investment for long-term market penetration.

DCM Shriram is nearing the completion of a major CAPEX cycle, with net debt falling to ₹867 crore from ₹1,434 crore in March 2024, primarily due to reduced sugar inventory. The company has guided for a more moderate CAPEX of approximately ₹700 crore in FY26, focusing on finishing existing projects like the ECH plant and the ₹1,000 crore advanced materials (Epoxy) foray. The return on capital employed (ROCE) dipped slightly to 14% as new projects are yet to reach peak utilization, but management expects this to improve as assets sweat over the next 4-6 quarters.