Fairchem Organics Limited — Q4 FY25 earnings call

Call held 30 May 2025

Management summary

Fairchem Organics reported Q4 FY25 revenue of ₹121 crores, up 6.3% QoQ, but EBITDA margins compressed to 3.64% due to a 22% additional custom duty on a key raw material and pricing pressure from Chinese competitors. Despite these challenges, the company achieved over 11% volume growth QoQ and is making progress on its high-value Isostearic acid product, securing 16 customer approvals. New product development is underway, with equipment expected by December 2025 and trials starting in early 2026, utilizing 40,000 tons of earmarked capacity.

Highlights

  • Q4 volumes increased by greater than 11% on a quarter-to-quarter basis.

  • Q4 value growth achieved of greater than 6% on a quarter-to-quarter basis.

  • Isostearic acid volumes increased compared to last financial year.

  • Around 16 customer approvals received for Isostearic acid, with commercial orders already started.

  • Earmarked 40,000 tons (1/3rd of 120,000 MTPA raw material throughput) capacity for new products.

Concerns

  • EBITDA margins declined to 3.64% mainly due to relatively higher raw material cost as a percentage of sales.

  • 22% additional custom duty imposed on key raw material (dimer fatty acid) since September 14, 2024, leading to sharp cost escalation.

  • Inability to pass on cost burden to customers due to pricing pressure from Chinese competitors.

  • Paint industry demand expected to be soft during the monsoon period, with revival anticipated in Oct-Dec.

  • Management refused to disclose Isostearic acid margin profile, citing business secrets.

Key financials

2 periods

Q4

  • Revenue from Operations
    ₹121 Cr
    YoY -25% QoQ +6.3%
  • EBITDA
    ₹4 Cr
  • EBITDA Margin
    3.6%
  • Net Profit After Tax
    ₹0.6 Cr

FY25

  • Revenue from Operations
    ₹538 Cr
  • EBITDA
    ₹43 Cr
  • EBITDA Margin
    8%
  • Net Profit After Tax
    ₹22 Cr
  • Profit Margin
    4.1%

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

Capacity Utilization

  • Isostearic Acid Capacity Utilization Capacity Utilization · by end of this year (FY26) · Medium confidence Higher capacity utilization
    we are confident of achieving higher capacity utilization by end of this year.

    — Nahoosh Jariwala

  • Isostearic Acid Optimum Utilization Capacity Utilization · by next year (FY27) · High confidence Optimum utilization
    By next year, we should reach the optimum utilization.

    — Nahoosh Jariwala

Volume Growth

  • Isostearic Acid Pick-up Volume Growth · H1 FY26 and H2 FY26 · Medium confidence Further pick up
    Isostearic acid is gradually picking up. It will take further 6 months. In the first half of this financial year, it would pick up compared to the previous 6 months. And again, in the second half of this current financial year, it will further pick up.

    — Rajen Jhaveri

New Product Development

  • New Product Equipment Delivery New Product Development · before end of December (2025) · High confidence Equipment received
    We have ordered the equipment, which will take 6 months to come... before end of December, we should have all the equipment and we start trials in January, March period.

    — Nahoosh Jariwala

  • New Product Trials Start New Product Development · January, March period (2026) · High confidence Trials start

    — Nahoosh Jariwala

Capacity Allocation

  • New Product Capacity Capacity Allocation · Ongoing · High confidence 40,000 tons
    out of our installed capacity of 120,000 metric tons per annum in terms of throughput of raw material, we have already earmarked 1/3rd, that is 40,000 tons of capacity for this new product.

    — Rajen Jhaveri

Approvals

  • Isostearic Acid Approvals Approvals · by FY '26 · High confidence All approvals
    we are expecting all the approvals by FY '26. And then '26, '27, we will be operating, optimizing our utilization of this.

    — Rajen Jhaveri

What to watch in Q1 FY26

Isostearic Acid Volume Pick-up

H1 FY26
Current Gradually picking up, increased volumes vs last FY
Target Further pick-up in H1 FY26

Why it matters

Key to improving overall profitability and leveraging new product capacity, indicating market acceptance and ramp-up progress.

Isostearic acid is gradually picking up. It will take further 6 months. In the first half of this financial year, it would pick up compared to the previous 6 months. And again, in the second half of this current financial year, it will further pick up.

Risks & concerns

  • High Raw Material Costs due to Custom Duty

    high

    22% additional custom duty on dimer fatty acid since Sep 14, 2024, leading to sharp cost escalation and EBITDA margin compression.

    Management acknowledged

  • Competition from Chinese Manufacturers

    medium

    Chinese competitors are not subjected to similar additional custom duties, leading to pricing pressure and inability to pass on increased costs.

    Management acknowledged

  • Slow Government Response to Policy Issues

    medium

    Representation made to the government for increased custom duty on raw material is unlikely to yield quick results due to the company being a sole manufacturer.

    Management downplayed

  • Demand Cyclicality in End-User Industries (Paint Sector)

    medium

    Paint industry demand is seasonal, with a slowdown during the monsoon period, impacting sales, though recovery is expected Oct-Dec.

    Management acknowledged

  • Long Approval Cycles for Specialty Products (Isostearic Acid)

    medium

    Trials and approvals for Isostearic acid in the cosmetics industry take a long time, delaying optimal utilization, though it also creates high entry barriers.

    Management acknowledged

Q&A highlights

4 direct, 2 evasive
Custom Duty on Raw Material Partial
Being the only player in India, it is really tough. We are trying our best, but I cannot say when it will happen... it is highly unlikely that our sole request may receive substantial attention from the government.

Highlights the company's vulnerability to government policy and lack of industry support for duty reversal, impacting raw material costs and competitive position.

Asked by Shivam Parekh

Paint Industry Demand Outlook Direct
we are till date fairly comfortable as regards our sales to all the top paint industry players because the product what we are manufacturing is one of a kind... A little bit of downside is there that I won't disagree with you. But it is there... this quarter is going to be the monsoon period. And typically, during monsoon period, paint activity is always on the lower side. So probably we can expect things to revive back in October-December quarter for the paint industry per se.

Provides insight into a key end-user industry's demand cycle and management's expectation for recovery, indicating potential sales fluctuations.

Asked by Shivam Parekh

Isostearic Acid Optimum Utilization Timeline Direct
By next year, we should reach the optimum utilization.

Sets a clear timeline for the ramp-up of a high-value product, indicating future revenue and margin potential.

Asked by Ritesh Poladia

Isostearic Acid Customer Approvals Direct
Around 16 approvals we have got... No, no, quite a few commercial orders have also started going, quite a few.

Shows tangible progress in commercializing the new product, moving from trials to actual sales and market acceptance.

Asked by Ritesh Poladia

New Products Commercialization Timeline Direct
Work is going on. We have ordered equipments whereby small quantity plant will be first in first stage, will be commissioned. We have ordered the equipment, which will take 6 months to come... before end of December, we should have all the equipment and we start trials in January, March period. So nothing can be commercially approved in this year. It will happen in FY'25.

Provides a timeline for the next phase of product diversification and capacity utilization, indicating future growth drivers.

Asked by Ritesh Poladia

Company Guidance Policy Evasive
No, our company never gives guidance. We never give guidance of the future... Whatever internally we have shared with the promoters, that only was placed there. We are not giving any guidance in any of the concalls.

Highlights a discrepancy between analyst perception and management's stated policy on providing forward guidance, indicating a cautious approach to future projections and potentially limiting investor visibility.

Asked by Ritesh Poladia

Isostearic Acid Margins Evasive
See, this is all a part of a business secret. And in this concall, subsequently placed on the stock exchanges of BSE, NSE and then everybody has a look at it. In the interest of our 30,000 shareholders only, it will be better if we refrain from answering certain questions in the interest of our 30,000 shareholders.

Management's refusal to disclose margin details for a key product, citing competitive reasons, limits investor insight into its profitability and potential impact on overall company margins.

Asked by Madhur Rathi

2 min read 5 chapters

Detailed narrative

Q4 FY25 Performance and Margin Compression

Fairchem Organics reported Q4 FY25 revenue from operations at ₹121 crores, marking a 6.3% sequential increase but a 25% year-on-year decrease. Despite volume growth exceeding 11% and value growth over 6% quarter-on-quarter, EBITDA margins compressed significantly to 3.64%, resulting in a net profit after tax of approximately ₹60 lakhs. The full fiscal year FY25 saw revenues of ₹538 crores and an EBITDA margin of 7.96%, with a net profit of ₹22 crores and a profit margin of 4.09%.

Impact of Custom Duties and Chinese Competition

A major challenge impacting profitability is the 22% additional custom duty imposed on dimer fatty acid, a key raw material, effective September 14, 2024. This duty has sharply escalated costs, which the company has been unable to pass on to customers due to intense pricing pressure from Chinese competitors who are not subject to similar tariffs. Management is exploring new raw materials, energy saving, and yield improvement initiatives to mitigate this cost burden.

Progress on High-Value Isostearic Acid

The company is making steady progress with its high-value Isostearic acid product, reporting increased volumes compared to the last financial year. Management expects a further pick-up in the first half of FY26, with optimum utilization targeted by FY27. Around 16 customer approvals have been secured, and commercial orders have already begun, indicating a positive market reception despite the long approval cycles inherent in the cosmetics industry.

New Product Development and Capacity Allocation

Fairchem Organics is actively developing new products, with equipment for a small-quantity plant ordered and expected to arrive within six months, by December 2025. Trials for these new products are slated to begin in the January-March 2026 period. The company has earmarked 40,000 tons of its 120,000 metric tons per annum raw material throughput capacity for these new offerings, signaling a strategic shift towards product diversification.

Paint Industry Outlook and Demand Cyclicality

While sales to the paint industry, a significant end-user, have seen a slight decline, management remains 'fairly comfortable' due to the unique nature of their product. However, a broader revival in paint industry demand is anticipated only in the October-December quarter, following the typical monsoon-induced slowdown. The company acknowledges that a sustained recovery depends on the real estate sector's performance.

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