Finolex Industries Limited — Q1 FY26 earnings call

Call held 5 Aug 2025

Management summary

Finolex Industries delivered a resilient volume performance in Q1 FY26 despite an early monsoon impacting the peak agri season. However, profitability was severely impacted by declining PVC prices and lower realizations, leading to a sharp contraction in EBITDA margins to 9%. The company is strategically pivoting towards a higher non-agri mix and has completed significant capacity expansions to support long-term double-digit growth targets.

Highlights

  • Total income from operations stood at ₹1,043 crores, a decline of 9% YoY due to weaker sales realizations.

  • Pipes and Fittings volume grew by 2% to 92,129 metric tons despite a weak demand scenario and early monsoon.

  • EBITDA decreased significantly to ₹94 crores from ₹207 crores in Q1 FY25, with margins contracting to 9%.

  • PAT reported at ₹97 crores, compared to ₹505 crores YoY (which included a ₹339 crore exceptional gain).

  • CPVC segment showed strong performance with 10% volume growth, contributing 6% to total volume.

  • Total pipe capacity reached 5,20,000 MT following the addition of 50,000 tons over the last two quarters.

  • Net cash surplus remains robust at ₹2,533 crores as of June 30, 2025.

  • Management announced a shift to single-entity reporting as PVC resin is now almost entirely for captive consumption.

Concerns

  • PVC Price Volatility

Key financials

  1. Total Income ₹1,043 Cr -8.5%YoY
  2. EBITDA ₹94 Cr -54.6%YoY
  3. EBITDA Margin 9%
  4. PAT ₹97 Cr -80.8%YoY
  5. Pipes & Fittings Volume 92,129 MT +1.7%YoY
  6. Net Cash Surplus ₹2,533 Cr +5.5%YoY

What they filed

Q1 FY27: revenue down 15.2%, net profit up 10.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue828 1,001 1,172 1,043 859 +4%898 −10%1,314 +12%884 −15%
EBITDA11 83 171 94 130 +1082%123 +48%332 +94%107 +14%
Net profit51 71 150 97 119 +133%110 +55%254 +69%107 +10%
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

  • Pipes and Fittings
    92,129 MT Volume2% Volume Growth70% Agri Share30% Non-Agri Share
  • CPVC
    10% Volume Growth6% Volume Share

Guidance & targets

Volume

  • Pipes and Fittings Volume Growth Volume · FY26 · Medium confidence 10%+
    Target is definitely above 10%. Definitely, our internal target with our dealers, everything is there. And as I said, already as of today, we are high single digits. So as the market picks up, there's a good chance we'll cross 10%.

    — Saurabh Dhanorkar, Managing Director

Capex

  • Annual Capital Expenditure Capex · FY26 · High confidence ₹150 crores

    Previously ₹125-150 crores → ₹150 crores

    Additionally, maybe another INR150 crores... Yes. Yes [to ₹150 crores for this year].

    — Saurabh Dhanorkar, Managing Director

  • Long-term Annual Capex Capex · Next 5 years · Medium confidence ₹200-300 crores
    So typically, a few hundred crores between INR200 crores to INR300 crores would be definitely spent every year in the expansion of pipes and fittings capacity.

    — Saurabh Dhanorkar, Managing Director

Market Share

  • Agri vs Non-Agri Mix Market Share · Medium Term · Medium confidence 50-50

    From 70-30 today

    But yes, our emphasis and our endeavor is also to make it to the extent possible, 50-50 over the period to come.

    — Chandan Verma, CFO

Risks & concerns

  • PVC Price Volatility

    high

    Declining PVC prices led to a sharp drop in EBITDA margins from 18% to 9% YoY.

    Both acknowledged

  • Monsoon Impact on Agri Demand

    medium

    Early onset of monsoon (May 22) subdued June demand, which is typically a strong month for agri-pipes.

    Management acknowledged

  • Inventory Management

    low

    Management claims effective inventory management prevented significant inventory losses this quarter.

    Analyst downplayed

Areas of evasion (3)

  • Specific breakdown of fitting vs pipe revenue
  • Timeline for cash distribution to shareholders
  • Granular retail vs institutional sales data

Q&A highlights

2 direct
Gross Margin Contraction vs Spread Improvement Partial
So that's why the cost front will remain more or less same in terms of number, but margin will also depend upon how the top line is going to get finally getting sold in the market. So that is how our margins got impacted.

Reveals that despite better raw material spreads (PVC/EDC), the rapid decline in final product realizations and fixed cost under-absorption led to margin pressure.

Asked by Praveen Sahay, PL Capital

Chairman's Involvement and Market Share Loss Direct
He's involved in the decision-making, he's involved very much involved in the Board decisions. And if at all, there is a dip in the performance, it is market driven or probably the team has to take the blame. It has nothing to do with the Chairman.

Addresses investor concerns regarding promoter involvement and management stability during a period of perceived underperformance.

Asked by Vipulkumar Shah, Sumangal Investments

Anti-Dumping Duty (ADD) Impact Direct
By the time the finance department comes out with the final circular, it will be may be October or so. So after that, definitely, there will be an increase in the domestic prices.

Provides a specific timeline (October) for a regulatory catalyst that could significantly improve domestic pricing power and margins.

Asked by Shravan S, Dolat Capital

2 min read 5 chapters

Detailed narrative

Volume Resilience Amidst Early Monsoon

Finolex reported a 2% YoY growth in Pipes and Fittings volume, reaching 92,129 MT. This was achieved despite the early onset of the monsoon on May 22, which significantly subdued demand in June. Management noted that demand has since recovered, with July showing high single-digit growth, and they remain confident in achieving double-digit growth for the full year FY26.

Margin Compression and PVC Price Volatility

The company's EBITDA margin contracted sharply to 9% from 18% in the previous year. This was primarily driven by a 9% decline in total income due to weaker sales realizations as PVC prices trended downwards. While raw material spreads like PVC/EDC improved to $552/MT, the drop in final product pricing outpaced cost reductions, impacting the bottom line.

Strategic Shift to Single-Entity Reporting

Management has decided to evaluate the company's performance as a single entity rather than splitting PVC resin and Pipes & Fittings segments. This change reflects the fact that PVC resin is now almost entirely used for captive consumption, with external sales dropping to negligible levels (1,000-2,000 tons of specialty grades). This shift aims to align financial reporting with the company's operational reality as an integrated pipe player.

Capacity Expansion and Capex Roadmap

Total pipe capacity has been increased to 5,20,000 MT, with 25,000 tons added in the March quarter and another 25,000 tons in the current quarter. The company has guided for a ₹150 crore capex for FY26, with plans to spend ₹200-300 crores annually over the next five years to sustain growth. Expansion will primarily focus on existing locations in Ratnagiri and Masar due to available infrastructure.

Anticipated Regulatory Tailwinds

Management is closely watching the implementation of Anti-Dumping Duties (ADD) and BIS standards. They expect the ADD recommendation within August 2025, with a final circular likely by October. This is anticipated to drive a domestic price increase of ₹3 to ₹6 per kg, which would provide a significant boost to margins in the second half of the fiscal year.

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