Epigral Limited

Epigral reported Q3 FY26 revenues of INR 603 crores, a marginal 2% sequential increase, with volumes remaining largely flat. The derivatives and specialty business showed a positive trend, contributing 52% of total revenue, up from 50% in the previous quarter. However, profitability was significantly impacted, with EBITDA dropping 22% QoQ to INR 103 crores, resulting in a contracted margin of 17%. This decline was primarily attributed to lower realizations for certain products, rising raw material costs, and higher inventory costs, alongside a one-time^📎 expense for Labor Code changes that contributed to a PAT of INR 39 crores.

Management noted that the chemical market experienced headwinds in the first half of Q3 FY26 due to prolonged monsoon, festive season disruptions, and plant maintenance, but volumes picked up strongly from mid-November. They believe Q3 represented a 'bottom-out situation' for the industry. Looking ahead, Epigral expects a positive momentum to persist, with demand recovering and EBITDA margins projected to improve to the 21-23% range from Q4 FY26 onwards, driven by improving PVC prices and better realization pass-through.

Epigral's strategic capex projects, including doubling capacity for CPVC, epichlorohydrin (ECH), and wind solar hybrid power plants, are on schedule for commissioning within the announced timelines. The chlorotoluene value chain plant, commissioned in March 2025, is anticipated to contribute sizably to the P&L from FY27. The company is also finalizing plans for new projects to enhance its integrated complex and extend its value chain, which are expected to drive significant growth from FY29 onwards, aligning with the target of 70% revenue from derivatives and specialty businesses.

Despite concerns about overcapacity, particularly with competitors like Reliance and Adani expanding PVC capacities, Epigral remains confident in the long-term demand for CPVC and ECH. Management expects initial lower utilization for 6-12 months post-commissioning of new capacities (expected Sep '26) but believes India's robust demand growth, especially from real estate for CPVC (projected 10-12% annual growth to 5 lakh tonnes by FY29-30) and epoxy for ECH, will absorb new supplies. ECH pricing is closely tied to glycerin prices, which are expected to remain high due to global biodiesel market dynamics.

The Electrochemical Unit (ECU) for Q3 FY26 was around INR 29,000-30,000, showing a marginal QoQ decline but expected to stabilize or improve. Management highlighted that large-scale PVC integration by competitors could lead to excess caustic soda supply, potentially driving down caustic prices while increasing chlorine prices. In a forward-looking move, Epigral is in the advanced stages of finalizing a new chemistry, with an announcement anticipated within the next couple of months, potentially by the end of FY26, signaling future product diversification.