DMCC Speciality Chemicals Limited — Q2 FY26 earnings call

Call held 12 Nov 2025

Management summary

DMCC Speciality reported a mixed Q2 FY26, with strong year-on-year revenue growth but a decline in quarterly PBT due to significant logistical challenges in its boron business and a sharp drop in European exports. The company is actively diversifying into new markets like Latin America and China, while also commissioning a solar power plant to enhance sustainability and reduce costs. Management maintains a cautious outlook on the Kutch smelter's potential impact on sulfuric acid pricing and plans for incremental CAPEX.

Highlights

  • Q2 FY26 Revenue reached INR 126 crores, marking a 25% increase compared to the same quarter of the previous year.

  • H1 FY26 top line grew to INR 250 crores, a significant increase from INR 188 crores in the first half of the previous financial year, representing a 32.98% YoY growth.

  • H1 FY26 profit before tax (PBT) surged to INR 19 crores, an 82.69% increase from INR 10.4 crores in the first half of the previous financial year.

  • A solar power plant was commissioned at the end of Q2 FY26, expected to cover over 80% of the Roha plant's energy requirements with renewables from Q3 FY26, reducing costs and carbon footprint.

  • The company successfully passed on increased sulfur costs to customers in its sulfuric acid business, maintaining price realization.

Concerns

  • Q2 FY26 profit before tax (PBT) declined to INR 8.28 crores, down 24.73% QoQ from INR 11 crores and 3.72% YoY from INR 8.6 crores in the same quarter previous year.

  • The boron business faced significant logistical challenges due to a new distributor, leading to lost sales and profitability, with an estimated loss of INR 10 crores per month in top line.

  • Exports to Europe for specialty chemicals have 'practically disappeared,' representing a loss of at least INR 40 crores, attributed to internal European energy and industrial policies.

  • Increased working capital requirements are anticipated due to new terms in the boron business and rising raw material prices, necessitating arrangements with bankers.

Key financials

2 periods

Headline

  • Revenue
    ₹126 Cr
    YoY +25% QoQ 0%
  • PBT
    ₹8.28 Cr
    YoY -3.7% QoQ -24.7%

H1

  • Revenue
    ₹250 Cr
    YoY +33%
  • PBT
    ₹19 Cr
    YoY +82.7%

What they filed

Q1 FY27: revenue up 99.2%, net profit up 150.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue103 118 125 127 126 +22%151 +28%178 +42%253 +99%
EBITDA15 18 15 17 14 −7%15 −17%18 +20%34 +100%
Net profit6 8 6 8 6 +0%6 −25%8 +33%20 +150%
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

  • Commodity Business (Sulfuric Acid & Allied)
    95% Capacity Utilization100% Capacity Utilization Range
  • Specialty Chemical Business
    50% Capacity Utilization

Capital allocation

high confidence
  • Capex ₹10 Cr existing cash flows as well as some borrowings
    About INR 10 crores is our CAPEX approved for this year and it will be around the same level next year unless we do some other projects. So, we will come back to the Board as well as shareholders if there's anything significant. We will do incremental things only for at least the current scenario.
  • Debt Debt disclosed
    We have reduced our debt, as you can probably see from the balance sheet, and we will continue to do so. We will be using some incremental CAPEX we will be doing using our existing cash flows as well as some borrowings. But the idea is not at this time to do any large CAPEX. We will do incremental things only for at least the current scenario. We will currently reduce our term loans.
  • Liquidity Liquidity disclosed Will need more working capital, arranged with bankers.
    You are exactly right. We will need more working capital. We have already arranged that with our bankers, and they are supporting us.

Guidance & targets

Operational

  • Boron business operational status Operational · H2 Q3 FY26 onwards · High confidence Normal operation
    From the second half of Q3, we will be in normal operation.

    — Bimal Goculdas

Energy

  • Renewable energy coverage at Roha plant Energy · Current quarter (Q3 FY26) onwards · High confidence More than 80%
    The full effect of that, of course, will be seen in this quarter, current quarter onwards. But we expect to reduce not only our electricity cost, but our carbon footprint even further with this. And more than 80% of our requirement at Roha will be covered by renewables and not by fossil fuels.

    — Bimal Goculdas

Capex

  • Annual CAPEX Capex · FY26 and next year · High confidence INR 10 crores
    About INR 10 crores is our CAPEX approved for this year and it will be around the same level next year unless we do some other projects.

    — Bimal Goculdas

What to watch in Q3 FY26

Boron Business Operational Normalization

H2 Q3 FY26 onwards
Current Logistical challenges, plant not at capacity until November
Target Normal operation, full capacity utilization

Why it matters

Key to recovering lost sales and profitability from a high-margin segment and improving overall financial performance.

From the second half of Q3, we will be in normal operation.

Risks & concerns

  • Boron Business Logistical Challenges

    high

    New distributor's lack of setup, long lead times (90-100 days), and financial issues led to lost sales and profitability, impacting an estimated INR 10 crores per month in top line.

    Management acknowledged

  • Decline in European Export Market

    high

    Exports of specialty chemicals to Europe have 'practically disappeared' (at least INR 40 crores) due to internal European energy and industrial policies, with management skeptical of a near-term revival.

    Management acknowledged

  • Kutch Smelter's Potential Impact on Sulfuric Acid Pricing

    medium

    The full operational scale-up of the Kutch smelter is expected to introduce a large quantity of sulfuric acid into the market, which is 'bound to disrupt the pricing' and could pressure commodity business margins.

    Management acknowledged

  • Increased Working Capital Requirements

    medium

    New terms for the boron business and rising raw material prices necessitate higher working capital, though arrangements with bankers are in place.

    Management acknowledged

  • Competition in New Markets (e.g., China)

    medium

    While exploring new markets like China, management recognizes the scale and efficiency of local players and the need to ensure long-term competitiveness before taking on additional capital risk.

    Management acknowledged

Q&A highlights

7 direct
Boron Business Disruption and Impact Direct
Basically, the new distributor did not have any setup or any experience in the business. So, they had to start from zero... And the stocks that we used to buy from stock in India. So, the lead time was like a matter of days, like a couple of days and now we suddenly had to start with a lead time of 100 days... boron business would be around INR 10 crores per month. And that is what we have lost in terms of top line.

Clarifies the root cause of Q2 underperformance in the boron business, quantifies the revenue loss, and indicates the high-margin nature of the lost business.

Asked by Sanjay Ladha

Kutch Smelter's Impact on Sulfuric Acid Pricing Direct
as they fully scale up, it will put a large quantity of material into the market, which is bound to disrupt the pricing. We don't know when it will happen. We don't know the extent, but I'm just giving a cautionary Statement as a matter of good governance.

Highlights a potential future risk to the company's commodity business margins due to increased supply from the Kutch smelter, despite current price pass-through ability.

Asked by Sanjay Ladha

Decline in European Exports and Diversification Direct
our total exports were about INR 100 crores at one time, INR 120 crores even and out of that, at least INR 40 crores or so would be to Europe. So, that has practically disappeared and that is what we are looking to replace... it is all specialty chemicals. So, that was a good contribution to the bottom line.

Quantifies the significant loss of high-margin specialty chemical revenue from Europe and underscores the strategic importance of diversifying into new geographies like Latin America and China.

Asked by Sanjay Ladha

R&D and New Product Development Strategy Partial
we have currently not added any new products. We are working on process development. We are looking at expanding our applications and within the same chemistry areas. So, for example, if we are doing thiophenols, we are looking at different types of thiophenols. In the specialty borates, we are looking at some newer specialty borates.

Clarifies that the company's R&D focus is on incremental innovation within existing chemistry areas rather than entirely new product lines or industries, indicating a cautious approach to market entry.

Asked by Sanjay Ladha

Future CAPEX Strategy and Growth Direct
We are not currently looking at any large CAPEX. We are looking at incremental projects, which will sort of not have a big impact on our borrowings as well... But the idea is not at this time to do any large CAPEX. We will do incremental things only for at least the current scenario.

Sets clear expectations regarding the company's capital allocation strategy, emphasizing incremental growth and debt reduction over large-scale expansions in the current uncertain environment.

Asked by Kalyan

Increased Working Capital Requirements Direct
You are exactly right. We will need more working capital. We have already arranged that with our bankers, and they are supporting us.

Confirms the financial impact of new boron business terms and rising raw material prices on working capital needs and assures investors that funding arrangements are in place.

Asked by Riya Patel

Boron Raw Material Supply Chain Diversification Direct
the current source is by far the most economical source. So, it is better to build up some more stocks and things like this... it is not practical to say that we will be able to diversify the supply chain for boron because what we have is the best and It is something which we need to optimize within the existing framework.

Explains the company's strategy for managing raw material risk in the boron business, prioritizing cost-effectiveness and stock building over diversifying from the primary, most economical source.

Asked by Riya Patel

Opportunities in the Chinese Market Direct
China is the biggest producer by far in the world, but that also makes them the biggest consumer... As the Chinese move downstream, there could be opportunities for us to enter into the markets and we are talking about specialty chemicals, low-volume products, where we have just started exploring earlier this year, but we believe there are good opportunities.

Highlights the company's strategic focus on identifying niche opportunities in the large Chinese market, particularly for specialty and low-volume chemicals, as a part of its diversification efforts.

Asked by Henil Bagadia

2 min read 6 chapters

Detailed narrative

Q2 FY26 Performance Overview and H1 Highlights

DMCC Speciality reported a Q2 FY26 top line of INR 126 crores, which remained flat quarter-on-quarter but showed a 25% increase year-on-year. However, profit before tax (PBT) for the quarter declined to INR 8.28 crores, down from INR 11 crores in the prior quarter and INR 8.6 crores in the same quarter last year. For the first half of FY26, the company achieved a top line of INR 250 crores, a 32.98% increase from INR 188 crores in H1 previous FY, and PBT of INR 19 crores, an 82.69% increase from INR 10.4 crores in H1 previous FY.

Boron Business Logistical Challenges and Recovery Outlook

The boron business faced significant disruptions in Q2 FY26 due to a change in raw material distributors. The new distributor lacked established logistics and financial arrangements, extending lead times to 90-100 days and causing a lack of stock, resulting in an estimated loss of INR 10 crores per month in top line. Management expects the boron business to return to normal operation from the second half of Q3 FY26, with reasonably good volumes observed from November.

European Export Decline and New Market Diversification

Exports to Europe, particularly for specialty chemicals, experienced a substantial decline, with at least INR 40 crores of business 'practically disappeared.' This downturn is attributed to internal European issues like energy policies and reduced industrial consumption. To mitigate this, DMCC is actively exploring new markets in Latin America and China, reporting a 'reasonably good start' in these geographies, aiming to replace the lost European specialty chemical business.

Kutch Smelter and Sulfuric Acid Market Dynamics

The Kutch smelter has commenced operations, leading to increased sulfur costs that DMCC has successfully passed on to customers, contributing to price-driven top-line growth. However, management maintains a cautionary stance, anticipating that the full operational scale-up of the Kutch smelter will introduce a large quantity of sulfuric acid into the market, which is 'bound to disrupt the pricing' and could potentially impact the company's commodity business margins.

Capital Allocation Strategy and Working Capital Management

DMCC is pursuing a cautious capital allocation strategy, with approximately INR 10 crores approved for CAPEX in FY26 and a similar amount expected for the next year, focusing on incremental projects. The company is committed to reducing its debt and funding incremental CAPEX through existing cash flows and some borrowings, with no plans for buybacks. An increase in working capital is anticipated due to new boron business terms and rising raw material prices, for which arrangements have been made with bankers.

R&D Focus and Renewable Energy Integration

The company's R&D efforts are concentrated on process development and expanding applications within its existing chemistry areas, such as thiophenols and specialty borates, rather than entirely new product lines. Additionally, DMCC commissioned a solar power plant at the end of Q2 FY26, which is expected to cover over 80% of the Roha plant's energy requirements with renewables from Q3 FY26, aiming to reduce electricity costs and carbon footprint.

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