GHCL Q1 FY26 earnings call

The global soda ash market is currently experiencing muted demand and an oversupply situation, leading to significant price pressure worldwide. In the last two years, approximately 10 million tonnes of capacity have been added, primarily driven by China, with another 1 million tonnes added this calendar year (net of 1 million tonnes closed in Europe). Synthetic soda ash producers globally are struggling to cover their cash costs, indicating a risk of closure for high-cost plants. Management anticipates the global market will remain challenging for at least the next 2-3 quarters.

Despite global headwinds^🌐, Indian soda ash demand growth was robust at 5% in FY25 and is expected to grow 5-6% in FY26, partly driven by the solar sector. However, India is also facing an oversupply due to global price pressure, high imports, and domestic capacity additions. GHCL's Q1 FY26 revenue declined to ₹823 crores from ₹849 crores YoY, and PAT decreased to ₹145 crores from ₹151 crores YoY. The company's EBITDA margin stood at 27.3%, a 40 bps decline YoY, but management highlighted that internal efficiencies and raw material cost optimization mitigated a larger impact from a 19% price drop over two years.

GHCL is actively pursuing diversification and growth through new projects. Its initial bromine and vacuum salt projects are underway and expected to be commissioned in the latter half of FY26, with major advantages anticipated in FY27. The company's new large-scale soda ash plant (Phase 1 and 2) is projected to be operational within the next 3-4 years, with an estimated IRR of 17-18%. This greenfield expansion, with a total capex of ₹2,000-3,000 crores, is designed with new technology to achieve better operating costs than existing plants.

GHCL has focused on internal efficiencies and cost optimization, which have been crucial in mitigating the impact of declining soda ash prices. Management stated that 50% of the benefits in maintaining profitability despite price drops came from internal efficiencies, and the other 50% from raw material price reductions. These internal efficiencies, including effective raw material utilization and waste reduction, are considered sustainable and are expected to provide a significant advantage once market conditions normalize.

The solar glass sector is identified as a key emerging demand driver for soda ash in India, aligning with the country's green energy mission. India currently has 116 gigawatts of solar glass capacity, consuming approximately 130,000 tonnes of soda ash. With the government's aim to reach 300 gigawatts by 2030, a substantial increase in soda ash demand is expected, potentially tripling current consumption. Several large players are expanding capacity, with major benefits anticipated in late FY26 or FY27.

GHCL maintains a strong balance sheet with ₹1,142 crores in cash and investments at the quarter end. The company generated ₹191 crores in cash profit after tax in Q1 FY26 and spent ₹121 crores on growth capex. A dividend of ₹115 crores was paid on July 24. For the new greenfield soda ash facility, the company plans to fund the capex with a one-time^📎 debt, but expects its debt-equity ratio to remain strong, less than 1:5.6, even after both phases are completed, aiming to return to a no-debt situation within two years post-project completion.