Fairchem Organics Limited — Q1 FY26 earnings call

Call held 13 Aug 2025

Management summary

Fairchem Organics reported a sequential improvement in Q1 FY26, with revenue growing 8.5% QoQ to INR 131 crores and PAT doubling to INR 1.2 crores, driven by volume growth and power/fuel cost savings. However, the company continues to face challenges from high raw material prices and Chinese dumping in the Dimer Acid market, leading to a 21% YoY revenue decline. Management is optimistic about value growth from isostearic acid and positive trials for a lower-cost alternative raw material, with a decision expected by November.

Highlights

  • Revenue from operations increased by 8.5% quarter-on-quarter to INR 131 crores.

  • EBITDA margin improved to 3.97% from 3.64% in the previous quarter.

  • Net profit after tax doubled sequentially to approximately INR 1.2 crores.

  • Revenue growth was primarily driven by 7.5% growth in volumes.

  • Initial trial runs for an alternative raw material to reduce import dependence have been positive, with potential for lower costs.

Concerns

  • Revenue decreased 21% year-on-year.

  • The Dimer Acid market continues to face pressure due to aggressive price competition from Chinese suppliers and high raw material costs.

  • Raw material prices remain largely firm due to elevated global vegetable oil prices, despite a partial rollback of additional custom duties.

  • The customer validation process for the value-added isostearic acid product is taking longer than expected.

Key financials

  1. Revenue from Operations ₹131 Cr -21%YoY
  2. EBITDA ₹5 Cr
  3. EBITDA Margin 4% +9.1%QoQ
  4. Net Profit After Tax ₹1.2 Cr +100%QoQ
  5. Volume Growth 7.5%
  6. Domestic Sales Mix 92.5%
  7. Export Sales Mix 7.5%
  8. Processed Volume 11,699 metric tons
  9. Sold Volume 13,662 metric tons
  10. Capacity Utilization 70%

What they filed

Q1 FY27: revenue up 34.4%, net profit up 900.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue139 114 121 131 112 −19%100 −12%117 −3%176 +34%
EBITDA9 8 4 5 4 −56%4 −50%8 +100%18 +260%
Net profit4 4 1 1 1 −75%0 −100%4 +300%10 +900%
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.

Guidance & targets

Volume

  • Isostearic Acid Export Volumes Volume · coming quarters · Low confidence increase gradually
    Our value-added product, isostearic acid and expect export volumes to increase gradually over the coming quarters.

    — Nahoosh Jariwala, MD and Chairman

New Product Development

  • Alternative Raw Material Commercialization Decision New Product Development · by November · Medium confidence decision by November
    Initial trial runs have been positive. And after some more runs, we will decide to go on commercial or not. So, maybe by November, we'll be through with the whole thing.

    — Nahoosh Jariwala, MD and Chairman

What to watch in Q2 FY26

Alternative Raw Material Commercialization Decision

By November (Q3 FY26)
Current Initial trial runs positive
Target Decision on commercialization

Why it matters

Potential for lower raw material costs and improved spreads, crucial for margin recovery.

Initial trial runs have been positive. And after some more runs, we will decide to go on commercial or not. So, maybe by November, we'll be through with the whole thing.

Risks & concerns

  • Chinese Dumping and Price Competition

    high

    Aggressive price competition from Chinese suppliers in the Dimer Acid market, leading to a 20% price drop in 24 months.

    Management acknowledged

  • High Raw Material Costs

    high

    Raw material prices remain largely firm due to elevated global vegetable oil prices, partially offsetting margin improvements.

    Management acknowledged

  • Regulatory Duties and Import Tariffs

    high

    A net impact of 11% duty still remains after partial rollback, impacting cost structure, and future business could be affected by U.S. tariffs on isostearic acid.

    Management acknowledged

  • Isostearic Acid Customer Validation Delays

    medium

    The customer validation process for isostearic acid is taking longer than expected as an Indian company builds trust in a market dominated by European/American players.

    Management acknowledged

Q&A highlights

5 direct
Chinese Dumping and Raw Material Costs Partial
Yes. The additional duty was levied in September, and we made the representation to government in November 2024. But I think as we are the only manufacturer of dimer fatty acids in India. Maybe being a single manufacturer, it might be for them also to take call would be a tough thing. No, not in short term.

Highlights the ongoing challenge from Chinese dumping and high raw material costs, with limited short-term government relief expected.

Asked by Aashish from InvesQ PMS

Dimer Acid Price Drop due to Dumping Direct
See briefly, I can tell you before 24 months, the rolling dimer acid price was in the range of INR 180,000 per metric tons. And today, it is less than INR 145,000 per ton. You see a drop of around 20%.

Quantifies the significant price erosion in dimer acid due to competitive pressures, indicating the severity of the dumping issue.

Asked by Aashish from InvesQ PMS

Impact of Partial Duty Rollback Direct
No, this had already come into impact in the end of May. We say that it has not resulted into any decline in the raw material price. So, it has not affected anything positively.

Clarifies that a recent partial duty rollback has not translated into positive impact on raw material prices, indicating continued cost pressure.

Asked by Chirag from Budhrani Finance

Isostearic Acid Capacity and Global Market Direct
There is no data available about the exact demand but one can say easily that based on the tentative information we have collected from the companies with whom we are negotiating or where our material is under approval, our capacity would be hardly 10% or 15% of total demand.

Provides context on the company's significant potential market share (10-15% of global demand) for the high-margin isostearic acid product.

Asked by Madhur Rathi from Counter Cyclic Investments

Isostearic Acid Customer Validation Delays Direct
It's taking pretty long, much more than what we initially expected or much more than what initially they had suggested that they will take 3 to 6 months. Maybe they are taking a little bit long. And the chances are that we being an Indian Company coming for the first time in the market and only 2 other companies doing, it takes time for them to build a trust in us.

Explains the reasons behind the slower-than-expected ramp-up of isostearic acid sales, highlighting the challenges of being a new entrant in a specialized market.

Asked by Mirav, an individual investor

Alternative Raw Material Development Progress Direct
Yes. We have. Initial trial runs have been positive. And after some more runs, we will decide to go on commercial or not. So, maybe by November, we'll be through with the whole thing.

Indicates positive progress on a strategic initiative to reduce import dependence and potentially lower raw material costs, with a decision timeline.

Asked by Mirav, an individual investor

EBITDA Margin Outlook with Isostearic Acid and Lower Costs Partial
I mean, see, this U.S. duty issue has to settle first of all. Sir lots of factors are going on right now, really giving at 51% duty. So, many things are going right now to... It is difficult to predict anything.

Management expresses difficulty in providing specific margin guidance due to external factors like U.S. duty issues and overall market volatility, despite potential positives from new products.

Asked by Mirav, an individual investor

2 min read 6 chapters

Detailed narrative

Q1 FY26 Financial Performance Overview

Fairchem Organics reported a revenue from operations of INR 131 crores for Q1 FY26, marking an 8.5% increase quarter-on-quarter but a 21% decrease year-on-year. EBITDA stood at approximately INR 5 crores, with the EBITDA margin improving slightly to 3.97% from 3.64% in the previous quarter. The company achieved a net profit after tax of approximately INR 1.2 crores, which doubled sequentially, primarily driven by a 7.5% growth in volumes and savings in power and fuel costs.

Raw Material and Duty Impact

The company continues to face challenges from high raw material prices, which remain firm due to elevated global vegetable oil prices. Despite a partial rollback of additional custom duties in May, the net impact of an 11% duty still remains, affecting the cost structure. The basic custom duty on imported dimer acid is 7.5%, and the differential on raw material due to vegetable oil duty hikes is 22.5%. Management noted that the duty rollback has not positively impacted raw material prices.

Dimer Acid Market Challenges

The Dimer Acid market segment is under significant pressure due to aggressive price competition from Chinese suppliers and insufficient relief in raw material costs. Management highlighted that the rolling dimer acid price has dropped by approximately 20% over the last 24 months, from INR 180,000 per metric ton to less than INR 145,000 per ton. The company has made representations to the government regarding dumping but expects no short-term relief.

Isostearic Acid Market Expansion

Isostearic acid is identified as a key value-added product with promising growth prospects, and the company is one of only three global manufacturers. Fairchem's current capacity for isostearic acid is estimated to be 10-15% of the total world demand. However, the customer validation process for this product, particularly for cosmetics applications, is taking longer than expected as the company, being an Indian entrant, works to build trust in the market. Export volumes are expected to increase gradually over the coming quarters, with sales already made to more than 7-8 countries.

Alternative Raw Material Development

Fairchem Organics is actively working on developing an alternative raw material to reduce its dependence on imports and improve spreads. Initial trial runs for this new raw material have been positive, and management anticipates making a decision on commercialization by November. This initiative is expected to offer lower costs compared to current raw materials, providing a positive sign to address the ongoing duty and raw material price challenges.

Capacity and Product Mix

The company's total installed raw material throughput capacity is 120,000 metric tons per annum. Of this, 40,000 metric tons are earmarked for new raw materials and finished products currently under developmental work, leaving 80,000 metric tons for existing products. The current capacity utilization stands at approximately 70% for the reported revenue levels. The sales mix for prime products (dimer acid, linoleic acid, and isostearic acid) remains between 70% and 75% of total sales value, with linoleic acid contributing around 40%, dimer acid 24-25%, and isostearic acid 6-7%.

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