Neochem Bio Solutions Ltd — Q4 FY26 earnings call

Call held 22 May 2026

Management summary

Neochem Bio Solutions Limited reported strong financial performance for FY26, with significant revenue and profit growth driven by strategic shifts towards own-brand products, specialty portfolio expansion, and improved capacity utilization. Margins expanded considerably, and the balance sheet strengthened through debt reduction. While elevated receivables and geopolitical tensions were noted as concerns, management expressed confidence in normalization and sustainability of growth and margins.

Highlights

  • FY26 revenue from operations grew over 32% YoY to INR110.7 crores, driven by broad-based demand.

  • EBITDA for FY26 increased 53% YoY to INR22.6 crores, with margins expanding 321 basis points to 20.4% due to favorable product mix and higher capacity utilization.

  • PAT for FY26 grew 62% YoY to INR12 crores, with PAT margin improving 197 basis points to 10.6%.

  • Capacity utilization improved to 53% in FY26, with 47% headroom for growth without major near-term manufacturing capex.

  • Long-term borrowings were substantially reduced to INR0.7 crores from INR14.3 crores in FY25, improving the debt-to-equity ratio from 1.8 to 0.2.

Concerns

  • Trade receivables showed a temporary peak, with year-end receivables at INR48 crores, representing 161 days, due to seasonality and clearing MSME payables.

  • Geopolitical tensions (West Asia crisis, Russia-Ukraine war) have impacted raw material prices and logistics, with management acknowledging 'some impact would definitely be there' on margins and exports.

  • Operating cash flow turned negative primarily due to the increase in receivables and clearing a significant portion of payables.

Key financials

2 periods

H2 FY26

  • Revenue from Operations
    ₹64.9 Cr
    YoY +37%
  • EBITDA
    ₹12.6 Cr
  • EBITDA Margin
    19.4%
  • PAT
    ₹6.9 Cr

FY26

  • Revenue from Operations
    ₹110.7 Cr
    YoY +32%
  • Total Income
    ₹113.4 Cr
    YoY +32%
  • EBITDA
    ₹22.6 Cr
    YoY +53%
  • EBITDA Margin
    20.4%
  • PAT
    ₹12 Cr
    YoY +62%
  • PAT Margin
    10.6%

What they filed

₹ Cr · quarterly
Line itemQ4 FY25Q4 FY26
Revenue47 65
EBITDA8 11
Net profit6 7
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

  • Industry-wise Revenue (FY26)
    74.3% Textile13.6% HPC6.2% Paints and Coatings83% Dyes and Chemicals5% Miscellaneous
  • Segment-wise Revenue (FY26)
    26.5% Esters28.7% Polymers17.4% Silicones27.3% Surfactants

Capital allocation

high confidence
  • Capex Capex disclosed
    Equally important, with nearly 47% capacity headroom still available within our existing facility, we possess significant embedded growth potential without requiring major manufacturing capex in the near term. In addition, our land parcel at Dholka provides strategic flexibility for the next phase of expansion whenever business requirements warrant additional capacity creation. (Shamik Nagar, Page 4) | On your second question regarding capex, we will not require any major planned capex over the next one-and-a-half to two years. However, ours is a formulation-driven business wherein certain formulations may require a couple of equipment additions or some lab testing equipment, which is an ongoing requirement for any manufacturing company. These are not very significant capex costs that we would need to plan separately for. (Swapnil Makati, Page 15)
  • Debt 0.2× EBITDA
    • Repayment Long-term borrowings reduced from INR14.3 crores in FY25 to INR0.7 crores in FY26. ₹13.6 Cr
    Long-term borrowings were substantially reduced to just INR0.7 crores in FY26 from INR14.3 crores FY25. This reflects our disciplined approach to capital allocation and our decision to utilize a portion of IPO proceeds towards repayment of legacy debt. As a result, our balance sheet today is considerably stronger and provides greater financial flexibility to support our future growth initiatives. The benefits of this de-leveraging are visible in our leverage metrics as well. Our debt-to-equity ratio has improved significantly from 1.8 in FY25 to 0.2 in FY26. Short-term borrowings stood at INR17.1 crores and primarily comprise of working capital facilities used to support inventory and receivable funding requirements. (Swapnil Makati, Page 7)
  • Liquidity Liquidity disclosed Short-term borrowings of INR17.1 crores primarily comprise working capital facilities used to support inventory and receivable funding requirements.
    Short-term borrowings stood at INR17.1 crores and primarily comprise of working capital facilities used to support inventory and receivable funding requirements. These facilities are aligned with the operating needs of a growing manufacturing business and remain well within the prudent levels. (Swapnil Makati, Page 7)

Guidance & targets

Profitability

  • Gross Margin Profitability · ongoing · High confidence 33-35%
    So broadly if you see -- yes, our business right now would have around 33% to 35% gross margin levels, around 18% to 20% EBITDA, and around 11% to 12% PAT. This has been the journey of all our peers who have now scaled up well, and I'm sure Neochem will continue this journey and remains sustainable.

    — Swapnil Makati

  • EBITDA Margin Profitability · ongoing · High confidence 18-20%

    — Swapnil Makati

  • PAT Margin Profitability · ongoing · High confidence 11-12%

    — Swapnil Makati

Capacity

  • Capacity Utilization Capacity · by the end of the current fiscal year · High confidence 65%
    So the capacity utilization, as we have already achieved 26% volume growth last year, and we expect to grow on similar lines, broadly we anticipate that by the end of the current fiscal year, we should reach around 65% capacity utilization. We are putting in all our efforts to optimum capacity utilization soon.

    — Swapnil Makati

Export

  • Export Revenue Share Export · next three years · High confidence 30-35%

    From 9% today

    in next three years Neochem's target is that we should have 30-35% revenue coming from exports.

    — Swapnil Makati

R&D

  • R&D Spend as % of Revenue R&D · this year · High confidence 2-3%

    From 2% today

    So broadly, Yash, while we had launched our IPO in H1 and the RHP was filed at that point in time, R&D spend was around 2% of our revenue, and broadly FY26 also closed at around 2%. We would like to maintain it in the range of around 2% to 3% for this year, and thereafter it would be need-based, because we have already completed a significant amount of R&D, where the projects are now getting commercialized and coming onto the production floor.

    — Swapnil Makati

Product Mix

  • Textile Contribution to Total Revenue Product Mix · next three years · High confidence <50%

    From <75% today

    Going forward, over the next three years, while we will continue to grow in textiles, the textile contribution should come down to below 50% of the total revenue.

    — Swapnil Makati

  • Bio-based Esters and Silicones Contribution to Total Revenue Product Mix · next two years · High confidence 55-60%
    We would like these two categories to contribute around 55% to 60% of our total revenue over the next two years.

    — Swapnil Makati

Working Capital

  • Trade Receivables Days Working Capital · by H1 FY27 or latest by the end of FY27 · High confidence 120 days

    From 161 days today

    Having said that, we understand that it is again going a little out of line as compared to our previous numbers, and we aim to bring it to around 120 days, maybe by H1 FY27 or latest by the end of FY27.

    — Swapnil Makati

What to watch in Q1 FY27

Trade Receivables Days Normalization

by H1 FY27 or latest by the end of FY27
Current 161 days
Target ~120 days

Why it matters

Normalization of receivables is crucial for improving operating cash flow and working capital efficiency.

Having said that, we understand that it is again going a little out of line as compared to our previous numbers, and we aim to bring it to around 120 days, maybe by H1 FY27 or latest by the end of FY27. (Swapnil Makati, Page 8)

Risks & concerns

  • Elevated Trade Receivables

    medium

    Trade receivables showed a temporary peak at INR48 crores (161 days) at year-end due to seasonality (55% revenue in H2, 30%+ in Q4) and clearing MSME payables. Management expects normalization to ~120 days by H1 FY27.

    Management acknowledged

  • Geopolitical Tensions (West Asia Crisis)

    medium

    The West Asia crisis, starting Feb 28, impacted raw material prices (30% crude-related) and logistics. While managed through inventory and price increases, management noted 'some impact would definitely be there' if the war continues.

    Management acknowledged

  • Seasonality of Business

    low

    Approximately 55% of annual revenue is generated during the second half of the year, and over 30% during the fourth quarter alone, naturally influencing year-end receivables.

    Management acknowledged

Q&A highlights

5 direct
Sustainability of margins with low capacity utilization Direct
So Mr. Agastya, what happens is that we are not a specialty chemicals company, we are a performance chemicals company, and the capacity utilization cycle is generally a little more delayed. The peaking of capacity utilization is broadly a little more delayed as compared to specialty chemicals, because ultimately our products are used by end consumers somewhere, and the approval cycles are a little longer. So even if we choose to ramp up our capacity utilization very quickly, it may not give us the desired result in a balanced way. So we have chosen to utilize it wisely while maintaining healthy top-line and bottom-line growth numbers.

Analyst questioned how high margins are sustained despite only 50-55% capacity utilization, and management explained the nature of their performance chemicals business and strategic capacity utilization.

Asked by Agastya Dave

Elevated receivables and payables changes Direct
Quarter four itself contributed over 32% of our annual revenue. So the figure that you see in the books, which is around INR48 crores as trade receivables, reflects a weighted average of around 160 days. However, that INR48 crores represents just around 97 days of sales from the last fiscal. So there has been a temporary peak because of that, number one. Number two is trade payables. Since the Government of India has MSME payment mandates, naturally we have to clear a significant amount of MSME payments towards the end of the year, and that is one impact. Secondly, the war started on 28th February, so naturally maintaining inventory, procuring it as quickly and cost-effectively as possible, and utilizing the working capital raised through investors' support became the priority. That is why payables have gone down while receivables are slightly on the higher side, which should normalize very soon.

Analyst highlighted significant changes in debtor and payable days, and management provided detailed reasons including seasonality, MSME mandates, and strategic inventory management during geopolitical tensions.

Asked by Mukesh Panjwani

Flat employee and other expenses despite revenue growth Direct
So Deepakji, I wish you also had the prior two years' numbers, which are currently not available with you. So there are two strategies: either you increase the business and then build the team, or you build the team first and then increase the business. So we started deploying the right kind of team members from FY21, and that is why from FY22 onwards you are seeing strategic shifts in terms of product mix, customer mix, and geography mix. ... So we had incurred a significant employee cost from FY21 onwards, wherein the results started becoming visible from FY23. So once you have the team in place, you do not need to keep adding more and more people. It is just that performance takes a certain amount of time to reflect.

Analyst questioned the unusual trend of flat/decreasing expenses with doubling revenue, and management explained it was due to upfront team building and strategic shifts from FY21-23 now yielding results.

Asked by Deepak Poddar

Sustainability of 30% growth for next 2-3 years Direct
We are still at a lower base where this growth is sustainable. Moreover, just to give you a glimpse, since 75% of the business is still in textiles, there has been a lot of consolidation in multinational companies, wherein Indian companies that are providing the right products and right services are getting significant benefits. Neochem is also trying to leverage this opportunity, wherein we still have substantial headroom for growth.

Analyst asked about the sustainability of high volume growth, and management affirmed it due to the company's current base and market opportunities in textiles.

Asked by Agastya Dave

Impact of West Asia crisis on raw material prices and margins Direct
So the West Asia crisis started happening on 28th February, and we just had one month before the close of the financial year, which was also the first year where Neochem had to report its earnings because of the IPO. So we were very vigilant. We already had a good amount of inventory, and we were very vigilant in terms of transferring the pricing impact to the customers. ... So there was an immediate price rise, but we maintained a good balance of existing inventory, incoming inventory, and spot market prices, and had good communication with our customers and started implementing the price increase to them. And fortunately, this was an overall industry practice this time, so that ultimately helped us as well.

Analyst inquired about the impact of geopolitical events, and management detailed their proactive inventory and pricing strategies to mitigate effects.

Asked by Marmik Khandelwal

Request for quarterly reporting structure Partial
Yes, Agastya, I fully acknowledge your point. Broadly, we have a very active and well-governed Board, and even the Board members are of the opinion that we should follow this practice. We have been listed only a few months ago. Allow us some time, because we would like to start the process properly and ensure continuity thereafter. We intend to remain very proactive with our investors and equally proactive regarding the steps that need to be taken. So we should be able to fulfill your expectations sooner or later, although maybe not in the first half of this year. We will review it after H1.

Analyst requested quarterly reporting for better investor visibility, and management acknowledged the need but indicated it would take some time to implement properly.

Asked by Agastya Dave

3 min read 7 chapters

Detailed narrative

Strong Financial Performance in FY26

Neochem Bio Solutions Limited reported robust financial results for FY26, with revenue from operations growing over 32% year-on-year to INR110.7 crores. EBITDA saw an even stronger increase of 53% year-on-year, reaching INR22.6 crores, which led to a significant EBITDA margin expansion of 321 basis points to 20.4%. Profit after tax (PAT) also grew by 62% year-on-year to INR12 crores, with PAT margin improving to 10.6%.

Strategic Shift and Product Mix Optimization

The company's improved profitability is largely attributed to a strategic shift from a white-label business model (75% of business till FY22) to an own-brand model (80% of business in FY26), enabling greater value addition. This was complemented by a favorable product mix, with Esters and Silicones segments growing significantly to 26.54% and 17.45% of revenue respectively, while Polymers and Surfactants saw a reduction. Management aims for bio-based esters and silicones to contribute 55-60% of total revenue in the next two years.

Capacity Utilization and Growth Potential

Capacity utilization at the Moraiya facility improved from approximately 35% in FY24 to 53% in FY26. With nearly 47% capacity headroom still available, the company possesses significant embedded growth potential without requiring major manufacturing capex in the near term. Management targets reaching 65% capacity utilization by the end of the current fiscal year, which is expected to further enhance operating leverage and margins.

Balance Sheet Strengthening and Debt Reduction

FY26 witnessed a significant strengthening of the company's financial position. Long-term borrowings were substantially reduced to just INR0.7 crores from INR14.3 crores in FY25, utilizing a portion of IPO proceeds. This led to a dramatic improvement in the debt-to-equity ratio, which decreased from 1.8 in FY25 to 0.2 in FY26, providing greater financial flexibility for future growth initiatives.

Sustainability-led Innovation and New Product Launches

Neochem is focusing on sustainability-led innovation, expanding its portfolio of bio-based and environmentally responsible formulations. Key launches include the FabBrite series for sustainable textiles pre-treatment, Ampinol series for post-dyeing agents, and Avakote series for paint and coatings. A partnership with Lamoral Coatings for bio-based fluorine-free water and stain repellent technology has also been commercialized, addressing the global shift away from PFAS-based chemistries.

International Expansion and Export Targets

The company's products now reach customers across 12 countries, with exports accounting for around 5% of FY26 revenue. Neochem views this as a significant long-term opportunity and targets increasing export revenue to 30-35% of total revenue within the next three years. Key focus regions for this expansion include South Asia, Southeast Asia, and parts of Africa, with plans to introduce products in North American markets as well.

Working Capital Management and Receivables

Despite strong revenue growth, operating cash flow turned negative primarily due to an increase in receivables and the clearing of a significant portion of payables, including MSME mandates. Year-end trade receivables stood at INR48 crores, representing approximately 161 days. Management acknowledged this temporary peak and aims to normalize receivables to around 120 days by H1 FY27 or the end of FY27, noting that over 35% of FY26 year-end receivables have already been realized by May.

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