Epigral Limited

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%.

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.

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.

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.

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.

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.