Epigral Limited — Q1 FY26 earnings call

Call held 4 Aug 2025

Management summary

Epigral reported a challenging Q1 FY26 with a 6% revenue degrowth to INR 615 crores, primarily due to plant maintenance and lower volumes. Despite this, the company maintained a strong EBITDA margin of 27% and significantly reduced its net debt to EBITDA to 0.60x. Strategic projects like the Chlorotoluene value chain were commissioned, and new chemistry for future growth is under evaluation, signaling a focus on long-term diversification and efficiency.

Highlights

  • EBITDA margin maintained at 27% on account of efficiency and better product mix.

  • Revenue contribution from derivatives and specialty business stood at 50%, with an expectation to reach 70% by FY28.

  • One-time credit of INR 81 crores from deferred tax liability, leading to reported PAT of INR 160 crores.

  • ROCE grew to 24% as of June 2025 from 21% as of June 2024 due to improvement in earnings.

  • Net debt to EBITDA reduced to 0.60x as of June 2025 from 1.6x as of June 2024 due to reduction in net debt.

  • Capex projects for CPVC resin, Epichlorohydrin, and 19.80 MW hybrid power plant are moving as per schedule and budget.

Concerns

  • Revenue degrowth of approximately 6% YoY to INR 615 crores, mainly due to lower volumes from plant maintenance work.

  • EBITDA dropped 7% to INR 163 crores.

  • PAT (excluding the one-time credit) stood at INR 79 crores, with a PAT margin of 13%.

  • PAT was impacted by interest and depreciation expenses of the Chlorotoluene project, which is yet to contribute significantly to the top line and bottom line.

  • Interest cost increased by INR 10-11 crores due to a negative mark-to-market provision on interest rate swap derivatives.

Key financials

  1. Revenue ₹615 Cr -6%YoY
  2. Plant Utilization 73% -3%QoQ
  3. EBITDA ₹163 Cr -7%YoY
  4. EBITDA Margin 27%
  5. PAT (incl. one-time credit) ₹160 Cr
  6. PAT (excl. one-time credit) ₹79 Cr
  7. PAT Margin (excl. one-time credit) 13%
  8. ROCE 24%
  9. Net Debt to EBITDA 0.6×
  10. ECU Realization ₹34,000
  11. Chlorine Price ₹-5,000

What they filed

Q1 FY27: revenue up 16.1%, net profit down 38.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue626 645 628 607 587 −6%597 −7%736 +17%705 +16%
EBITDA178 183 173 163 132 −26%103 −44%169 −2%179 +10%
Net profit81 104 87 160 52 −36%39 −62%82 −6%99 −38%
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

  • Derivatives and Specialty Business
    50% Revenue Contribution

Capital allocation

high confidence
  • Capex ₹122 Cr this quarter · ₹450 Cr (FY26) planned
    • Ongoing expansion of ECH and CPVC ₹122 Cr
    • Doubling capacity of CPVC resin and Epichlorohydrin plant
    • 19.80 megawatt of wind and solar hybrid power plant
    • Evaluation of new chemistry for growth beyond 2028 on new land (100 acres in Dahej)
    • Evaluation of project to strengthen integrated complex on current land parcel
    Our capex projects of doubling capacity of CPVC resin and Epichlorohydrin plant and 19.80 megawatt of wind and solar hybrid power plant are moving as per the schedule and are expected to be commissioned within the time line and budget announced. In quarter 1 2026, company has spent almost INR122 crores for ongoing expansion of ECH and CPVC.
  • Debt Net ₹600 Cr · 0.6× EBITDA
    Our net debt to EBITDA reduced to 6.06x as on 30th June '25 versus 1.6x as on 30th June 2024. This is mainly on account of reduction in net debt. FY '26, the debt number should be -- I mean, the net debt number should be in the range of around INR600 crores to INR600 crores kind of thing.

Guidance & targets

Revenue

  • Sizable revenue from Chlorotoluene value chain Revenue · by end of FY26 · Medium confidence sizable revenue
    We expect to generate sizable revenue from this by the end of this financial year.

    — Maulik Patel

Revenue Contribution

  • Derivatives and Specialty business revenue contribution Revenue Contribution · by FY28 · High confidence 70%

    From 50% today

    Revenue contribution from Derivative and Specialty business stood at 50% against 53% in quarter 1 '25. But as mentioned earlier, we expect to reach to 70% by FY '28.

    — Sanjay Jain

Capacity Utilization

  • Optimum utilization (plant) Capacity Utilization · by end of Q2 FY26 · High confidence optimum utilization
    We expect optimum utilization to start by end of quarter 2 FY '26 and also because of the early monsoon.

    — Maulik Patel

Performance

  • H2 FY26 performance vs H1 FY26 Performance · H2 FY26 · High confidence better
    Hence, we believe that second half of FY '26 will be better compared to first half of FY '26.

    — Maulik Patel

Energy Requirement

  • Total energy requirement met by green energy Energy Requirement · ongoing · High confidence 15%
    Approximately 15% of total energy requirement will be met through green energy contributing towards the environment by reducing carbon emissions.

    — Maulik Patel

Capex

  • Capex spend Capex · FY26 · High confidence INR 450 crores
    And the capex, as we have said, this year, we'll be spending around INR450 crores.

    — Milind Kotecha

  • Capex spend Capex · FY27 · High confidence INR 400-450 crores
    And again, next year, the capex will be in the same range, around INR400 crores INR400 crores, INR450 crores.

    — Milind Kotecha

Net Debt

  • Net debt Net Debt · FY26 · High confidence INR 600 crores
    FY '26, the debt number should be -- I mean, the net debt number should be in the range of around INR600 crores to INR600 crores kind of thing.

    — Milind Kotecha

Chlorotoluene Commercial Run

  • Commercial run at optimum level Chlorotoluene Commercial Run · from Q4 onwards · Medium confidence optimum level
    So this cycle will take some time. So we are expecting by quarter 3 -- end of quarter 3, I think we are able to done with this and the commercial run at a full an optimum level we can able to run from the quarter 4 onwards.

    — Maulik Patel

Interest Expenses

  • Overall interest expenses Interest Expenses · FY26 · High confidence INR 45 crores
    overall put together, it will be it's just a mark-to-market, whereas our interest expenses in the range of the year put together would be in the range of INR45 crores.

    — Milind Kotecha

What to watch in Q2 FY26

Plant utilization

by end of Q2 FY26
Current 73% (Q1 FY26)
Target Optimum utilization

Why it matters

Improved utilization will drive volume growth and operational efficiency, impacting revenue and margins.

We expect optimum utilization to start by end of quarter 2 FY '26 and also because of the early monsoon.

Risks & concerns

  • Volatility in chemical industry due to US tariffs and geopolitical situation

    medium

    Volatility was witnessed in quarter 1 FY '26 and is expected to continue on account of uncertainty on tariffs from the U.S. and also because of the geopolitical situation.

    Management acknowledged

  • Lower volumes due to plant maintenance work

    medium

    Revenue degrowth of around 6%, mainly on account of decrease in volumes due to the maintenance work happening at the plant and which will end by end of this quarter.

    Management acknowledged

  • Impact of Chlorotoluene project's D&A and interest without revenue contribution

    low

    Our quarter 1 FY '26 P&L numbers include depreciation and interest on the Chlorotoluene value chain project without much contribution to the top line and bottom line.

    Management acknowledged

  • Sluggish CPVC demand due to monsoon season and competitor production

    low

    Currently, there is a monsoon season... because of which there is a bit sluggish in the demand, but we expect that to I mean the demand should start from the Q3 onwards once Diwali starts.

    Analyst downplayed

Q&A highlights

7 direct
ECH price strengthening and glycerin delta Direct
So globally, if you see the propylene based ECH capacity is shutting off. That's why the new all new capacities are all glycerin-based. And that is the demand of glycerin is also increasing. And the same time when normally the global economy is doing good, the normal glycerin consumption in other applications other than the manufacturing as a raw material that is also moving up in the consumer products.

Explains the drivers behind ECH price strength, linking it to global supply-demand dynamics and broader economic health, which is crucial for understanding future price trends.

Asked by Nirav

New chemistry for new land and future growth strategy Direct
This new chemistry will be in line with the company's strategy, import substitution product where demand is expected to grow in double-digit percentage for next 10 years or so, and we can generate good ROCE.

Reveals the strategic direction for long-term growth beyond 2028, focusing on import substitution and high ROCE products, indicating a clear vision for diversification.

Asked by Rohit Sinha

Caustic plant utilization and maintenance schedule Direct
So Rohit, every 8 years, we have to do major change in the membranes and the coatings of the electrolysers. So that process is going on in the site right now, so which will end up by end of September. And probably from quarter 3 onwards, we are able to run at higher capacity.

Provides clarity on the reason for current lower utilization and a timeline for its resolution, indicating improved operational efficiency and capacity utilization from Q3 FY26.

Asked by Rohit Sinha

Chlorotoluene plant utilization and competitive intensity Direct
So this is a trial production and the samples we have given to the customers. Once they will approve, it will give us a trial order. And once the trial order will be given, then the commercial order will be converted. So this cycle will take some time. So we are expecting by quarter 3 -- end of quarter 3, I think we are able to done with this and the commercial run at a full an optimum level we can able to run from the quarter 4 onwards.

Explains the phased ramp-up strategy for new products, highlighting the customer approval process and providing a timeline for commercialization, which is key for revenue contribution.

Asked by Kautuk Yemdey

Impact of Adani/Reliance capacity on chlorine prices Direct
So chlorine, they are I think they are converting most of their chlorine into the PVC. So I don't think the chlorine -- that chlorine will come in the market.

Addresses a potential industry-wide concern about oversupply of chlorine, with management providing a reassuring view that new capacities will be captive, thus not impacting market prices negatively.

Asked by Jyoti

Higher interest cost this quarter Direct
Interest cost has gone up in this quarter compared to previous quarter, but this is mainly on account of the negative impact of mark-to-market provision. That is in the tune of around about INR10 crores to INR11 crores.

Clarifies that the increase in interest cost is due to a one-time non-cash MTM provision, not an underlying increase in borrowing costs, which is important for assessing recurring profitability.

Asked by Shubhanshu

CPVC demand and ADD on PVC Direct
So realizations of the CPVC moves in line with the PVC prices. So as of now, we don't see that. But currently, there is a monsoon season. In fact, the monsoon started earlier in this year because of which there is a bit sluggish in the demand, but we expect that to I mean the demand should start from the Q3 onwards once Diwali starts.

Provides insight into the demand dynamics for CPVC, attributing current sluggishness to seasonal factors and projecting a recovery, while also clarifying that ADD on PVC will not negatively impact EBITDA margins as CPVC prices will adjust in tandem.

Asked by Dhviti

3 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview

Epigral reported a revenue degrowth of approximately 6% year-on-year, reaching INR 615 crores in Q1 FY26. This was primarily attributed to lower volumes resulting from ongoing plant maintenance work, which is expected to conclude by the end of Q2 FY26. Despite the revenue decline, the company successfully maintained its EBITDA margin at 27% due to operational efficiencies and a favorable product mix. EBITDA for the quarter stood at INR 163 crores, a 7% drop from the previous year. Reported PAT, including a one-time deferred tax liability credit of INR 81 crores, was INR 160 crores; excluding this, PAT was INR 79 crores, with a PAT margin of 13%.

Strategic Diversification and Growth Drivers

The company's strategy to diversify into derivatives and specialty chemicals continues, with these segments contributing 50% to the revenue in Q1 FY26, down slightly from 53% in Q1 FY25. Management aims to increase this contribution to 70% by FY28. The Chlorotoluene value chain, commissioned in March 2025, is expected to generate sizable revenue by the end of FY26 and drive growth in FY27 and FY28. Epigral is also evaluating new chemistry for a 100-acre land parcel in Dahej, targeting import substitution products with double-digit growth for the next decade and good ROCE, with details expected in the next couple of quarters.

Capex and Capacity Expansion

Epigral's capex projects, including doubling capacity for CPVC resin and Epichlorohydrin, and a 19.80 MW wind and solar hybrid power plant, are progressing on schedule and within budget. The company spent INR 122 crores on these expansions in Q1 FY26. The total planned capex for FY26 is INR 450 crores, with an additional INR 400-450 crores projected for FY27. Once commissioned, the hybrid power plant will contribute 15% of the total energy requirement, with a total hybrid capacity of 38.14 MW.

Operational Efficiency and Utilization

Overall plant utilization in Q1 FY26 was 73%, a slight decrease from 76% in the previous quarter. This was impacted by maintenance work, particularly a major change in the membranes and coatings of electrolyzers at the caustic plant, which is expected to be completed by the end of September. Management anticipates optimum utilization across the plant from Q3 FY26 onwards, leading to a better second half of FY26 compared to the first half.

Financial Health and Capital Structure

The company demonstrated improved financial health, with ROCE growing to 24% as of June 2025, up from 21% in June 2024. Net debt to EBITDA significantly reduced to 0.60x as of June 2025, compared to 1.6x in June 2024, primarily due to net debt reduction. While interest costs increased by INR 10-11 crores this quarter, this was attributed to a negative mark-to-market provision on interest rate swap derivatives, with the overall annual interest expenses projected to be around INR 45 crores for FY26.

Market Dynamics and Product Realizations

The chemical industry is experiencing slower growth and volatility due to US tariffs and geopolitical situations, though domestic demand remains strong. ECH prices have strengthened due to global propylene-based ECH capacity shutdowns and increasing glycerin demand. CPVC price realizations are moving in tandem with PVC prices, and current sluggish demand is attributed to the monsoon season, with recovery expected from Q3 FY26. Management believes new capacities from players like Adani/Reliance will primarily be captive, thus not impacting market chlorine prices negatively.

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