Finolex Industries Limited — Q2 FY26 earnings call

Call held 10 Nov 2025

Management summary

Finolex Industries delivered a quarter of strong margin recovery despite volume headwinds caused by an extended monsoon. While agri-demand was muted, the company successfully pivoted towards the non-agri segment, which now accounts for 44% of volumes. Management is focusing on maintaining double-digit EBITDA margins (10-12% guidance for FY26) and is optimistic about the upcoming imposition of anti-dumping duties on PVC resin.

Highlights

  • Revenue from operations grew 4% YoY to ₹859 crores in Q2 FY26.

  • EBITDA surged to ₹130 crores in Q2 FY26 compared to ₹11 crores in Q2 FY25.

  • Q2 EBITDA margin stood at 15.1%, a significant expansion from the previous year's low base.

  • Total sales volume declined 6% YoY to 65,336 metric tons due to a prolonged monsoon impacting the agri segment.

  • Non-agri segment registered a volume growth of 7% YoY, increasing its share of total volume to 44%.

  • PAT for the quarter rose to ₹119 crores, up from ₹51 crores in the same period last year.

  • Company maintains a strong net cash surplus of approximately ₹2,360 crores as of September 30, 2025.

  • Management revised full-year volume growth guidance to mid-single digits from previous high-single/double-digit expectations.

Key financials

  1. Revenue ₹859 Cr +4%YoY
  2. EBITDA ₹130 Cr +1,081%YoY
  3. EBITDA Margin 15.1%
  4. PAT ₹119 Cr +133%YoY
  5. Sales Volume 65,336 MT -6%YoY
  6. Net Cash Surplus ₹2,360 Cr

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

  • Non-Agri Pipes & Fittings
    7% Volume Growth44% Volume Share
  • Agri Pipes & Fittings
    56% Volume Share
  • CPVC
    8% Volume Share10% Growth Rate
  • Fittings
    12% Volume Share18% Capacity Share

Guidance & targets

Margin

  • Full Year EBITDA Margin Margin · FY26 · High confidence 10% to 12%
    So on a year-on-year full year basis, we would like to maintain a higher digit -- higher digit EBITDA will be achievable... Around, you can say, around 10% to 12% around.

    — Udipt Agarwal, Managing Director

Volume

  • Annual Volume Growth Volume · FY26 · Medium confidence mid-single-digit

    Previously high-single to double-digit → mid-single-digit

    it would be fair to say that we will -- we are now looking at mid-single-digit numbers in terms of our growth forecast for the year.

    — Udipt Agarwal, Managing Director

Capex

  • Annual Capex Investment Capex · FY26 & FY27 · High confidence ₹100 crores to ₹200 crores
    We will be investing anywhere between INR100 crores to INR200 crores at a minimum in terms of our capex.

    — Udipt Agarwal, Managing Director

Capacity

  • Net Capacity Addition Capacity · Annual · Medium confidence 50, 70, 80 KT
    I don't think so 100 would be necessary, but somewhere in the region of 50, 70, 80 would be more realistic.

    — Udipt Agarwal, Managing Director

  • Capacity Utilization Capacity · FY27 | FY28 · Medium confidence 74% to 75%
    This will be around -- this will be roughly around 74% to 75% '27, '28.

    — Chandan Verma, CFO

Risks & concerns

  • Prolonged Monsoon Impact

    medium

    Heavy rains in Q2 led to a 6% volume dip, particularly in the high-volume agri segment.

    Management acknowledged

  • VCM Procurement Challenges

    medium

    Structural global issues in the VCM market are being managed through long-term contracts, but remain a watch item.

    Both acknowledged

  • PVC Price Volatility

    medium

    Management believes PVC prices have bottomed out and ADD will provide stability.

    Analyst downplayed

Areas of evasion (3)

  • Specific timelines for cash utilization
  • Actual procurement rates for VCM/EDC
  • Bifurcation of non-agri sales between infra and real estate

Q&A highlights

2 direct, 1 evasive
Inventory Gains and Margin Sustainability Direct
our gross margin during the current quarter stood at 42%, whereas the same number of the corresponding quarter of the previous year is 30%... inventory gain and loss as such is not directly in the quarter.

Clarifies that the margin expansion is driven by core operational improvements and product mix rather than transient inventory gains.

Asked by Shravan Shah, Dolat Capital

Utilization of ₹2,400 Crore Cash Balance Evasive
it is very difficult to put any timeline because it gave -- because there are -- depends up on what kind of our planning is going on in our cash that is there on the table.

Investors are concerned about the drag on ROE from a massive, idle cash pile; management provided no concrete timeline for deployment or return to shareholders.

Asked by Ritesh Shah, Investec India

Anti-Dumping Duty (ADD) Impact Direct
What we see is that the impact could be anywhere between INR3 to INR6 per kg depending on the origin region from where it comes.

Quantifies the potential benefit of the upcoming ADD, which could provide a pricing tailwind for domestic manufacturers like Finolex.

Asked by Ritesh Shah, Investec India

2 min read 5 chapters

Detailed narrative

Margin Resilience Amidst Volume Contraction

Finolex reported a 6% decline in total volumes to 65,336 MT for Q2 FY26, primarily due to an extended monsoon season that dampened agricultural demand. Despite this, EBITDA margins expanded significantly to 15.1% from a low base of 1.3% in the previous year. This was driven by a robust gross margin of 42%, up from 30% YoY, as the company benefited from a better product mix and stable PVC-EDC spreads of approximately $535.

Strategic Shift to Non-Agri and CPVC

The company is successfully reducing its dependence on the seasonal agri segment. Non-agri volumes grew 7% YoY, now representing 44% of the total mix compared to 39% last year. CPVC volumes continue to grow at double-digit rates, contributing 8% to the total volume. Management reiterated its long-term goal of achieving a 50:50 split between agri and non-agri segments to manage business seasonality.

The ₹2,400 Crore Cash Question

Finolex maintains a massive net cash surplus of ₹2,360 crores, which analysts highlighted as a potential drag on capital efficiency. Management remained non-committal on a specific timeline for deploying this cash, stating that it depends on internal planning, capex requirements, and board approvals. They noted that any surplus after internal needs would eventually be returned to shareholders, but provided no immediate roadmap.

Anti-Dumping Duty as a Catalyst

Management expressed high confidence that the imposition of anti-dumping duties (ADD) on PVC resin is imminent, likely within a week of the call. They estimate the impact will be an increase of ₹3 to ₹6 per kg depending on the region of origin. This is expected to support domestic pricing and margins, acting as a 'pass-through' that corrects overall market pricing.

Capacity Expansion and Utilization Roadmap

The company currently operates at a total capacity of 520,000 MT, having added 25,000 MT in Q1. H1 FY26 utilization stood at 70%. Management plans to invest ₹100-200 crores annually in growth capex, targeting net capacity additions of 50,000 to 80,000 MT per year. They expect capacity utilization to improve to the 74-75% range by FY27-28.

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