NEOCHEM

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%.

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 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.

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.

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.

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.

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.