Sharda Cropchem Limited — Q1 FY26 earnings call

Call held 25 Jul 2025

Management summary

Sharda Cropchem reported a robust Q1 FY26, with strong revenue and profit growth driven by a recovery in global agrochemical demand and favorable pricing. Gross margins expanded significantly, supported by stable input costs and currency benefits. The company maintains a healthy balance sheet with ample liquidity and a debt-free status, while planning substantial CAPEX for product registrations.

Highlights

  • Total revenue grew by 25% to ₹985 crores in Q1 FY26, driven by global demand revival and pricing recovery.

  • Gross margins expanded significantly by 630 basis points to 35.5% due to stabilizing input costs and favorable foreign exchange rates.

  • EBITDA grew by 67% to ₹142 crores, and PAT increased by 424% to ₹143 crores, showcasing strong profitability.

  • Working capital days improved by 18 days to 100 days as of June 30, 2025, indicating better operational efficiency.

  • The company remains debt-free with strong cash and liquid investments of ₹791 crores.

Key financials

  1. Revenue ₹985 Cr +25%YoY
  2. Gross Margin 35.5%
  3. EBITDA ₹142 Cr +67%YoY
  4. EBITDA Margin 14.4%
  5. PAT ₹143 Cr +424%YoY

What they filed

Q1 FY27: revenue up 9.0%, net profit down 38.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue777 929 1,829 985 929 +20%1,289 +39%2,065 +13%1,074 +9%
EBITDA90 115 303 215 133 +48%241 +110%487 +61%186 −13%
Net profit42 31 204 143 74 +76%145 +368%319 +56%88 −38%
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

Share of Revenue
₹985 Cr Total
  • Agrochemical Business ₹846 Cr 85.9%
  • Non-Agrochemical Business ₹139 Cr 14.1%

Capital allocation

high confidence
  • Capex ₹114 Cr this quarter · ₹400 Cr (FY26) planned
    • Product registrations ₹400 Cr
    CAPEX for the quarter stood at Rs. 114 crores. Cash and bank and liquid investments stood at Rs. 791 crores as on 30th June 2025. As we step into 2026, we aim to increase the product registrations with a planned CAPEX of Rs. 400-Rs. 450 crores backed by strong pipeline that reflects our resilience and growth focus.
  • Debt Debt disclosed
    We remain debt-free company and have cash bank liquid investment of Rs. 791 crores as of 30th June 25.
  • Liquidity Cash ₹791 Cr Company is debt-free with strong cash reserves.
    Cash and bank and liquid investments stood at Rs. 791 crores as on 30th June 2025. We remain debt-free company and have cash bank liquid investment of Rs. 791 crores as of 30th June 25.

Guidance & targets

Revenue

  • Revenue Growth Revenue · FY26 · High confidence 15%
    We maintain our stance for FY '26 revenue to grow by 15% with healthy EBITDA margins in the range of 15%-18%.

    — R. V. Bubna

Margin

  • EBITDA Margin Margin · FY26 · High confidence 15%-18%
    We maintain our stance for FY '26 revenue to grow by 15% with healthy EBITDA margins in the range of 15%-18%.

    — R. V. Bubna

  • Gross Margins Margin · FY26 · High confidence similar range as Q1 FY26
    We expect gross margins to be in the similar range in the financial year 2026.

    — R. V. Bubna

  • EBITDA Margin Margin · FY26 · Medium confidence towards 18% or little more than 18%

    Previously lower side of 15% → towards 18% or little more than 18%

    It may go towards 18% or little more than 18%. There is no precise calculations for this. This is our gut feeling and impression. No, our EBITDA margin estimates earlier were on the lower side of 15%. Now, it is on the higher side of 15%.

    — R. V. Bubna

Pricing

  • Pricing Situation Pricing · Ongoing · Medium confidence on the way of improvement, slow but steady increase
    We feel that the prices are on the way of improvement, the progress is slow, but they are on the increase.

    — R. V. Bubna

What to watch in Q2 FY26

EBITDA Margin Trajectory

next quarter
Current 14.4% in Q1 FY26
Target Towards 18% or more

Why it matters

Management expressed a 'gut feeling' that EBITDA margins could exceed the stated 15-18% guidance, indicating potential upside.

It may go towards 18% or little more than 18%. There is no precise calculations for this. This is our gut feeling and impression.

Risks & concerns

  • Rising Freight Costs

    medium

    Freight costs are increasing due to worldwide conflicts (Iran, Israel, Red Sea disturbances), leading to higher costs and longer travel times.

    It is on the trend of getting higher because of all these worldwide conflicts, particularly Iran, Israel and this Red Sea disturbances. That is one uncertainty. And they are leading to the increase in the freights and also increase in the time of travel.

    Management acknowledged

  • Foreign Exchange Rate Volatility

    medium

    The business model is sensitive to cross-currency exchange rates (sourcing in USD, selling in EUR). A 12% Euro-dollar improvement significantly benefited the company this quarter.

    See, it is mainly dependent upon the cross currency exchange rates. Our business model is that we source from China and all the sourcing is done in US dollars. And about 45% of our sales is in European region, which is in Euro currency or some of the country's local currencies like Polish zloty or Czech korunas and other things. So whenever the Euro dollar exchange currency improves, then we stand benefited and profited. Last year or about 6 months back, the Euro dollar exchange rate was $1.04, $1.03 to a Euro. Currently, the same exchange rate is $1.17 to a Euro. So this is more than 12% increase in the exchange rate, which is a straight benefit to Sharda's business.

    Management acknowledged

  • Tariff Hikes and Trade Policies

    low

    While China tariffs are declared, management believes the impact is minimal as they can pass on increases to customers due to China's essential role in sourcing.

    Very little because today, China is considered to be a factory to the world. So even US does not have much of an alternative sources to source from. And we are able to pass on all the tariff increase to the customers in US and they gracefully accept it, knowing what the situation is.

    Management downplayed

Q&A highlights

6 direct
Gross Margin Breakdown by Geography Direct
Yes, the gross margin in the Europe region was 43%, NAFTA region was 26%, LATAM 28% and rest of the world 26.5%, total 35.5%.

Provides specific margin data for key regions, highlighting Europe's strong contribution to overall gross margin.

Asked by Bhavya Gandhi

Drivers of European Region Growth Direct
Sir, growth on the agrochemical sector and good demand and good weather conditions to promote the agrochemical business, agricultural business which is supported by agrochemicals.

Explains the reasons behind the significant 43% YoY revenue growth in the European region.

Asked by Bhavya Gandhi

Non-Agchem Volume vs Value Growth Discrepancy Partial
No, we have not looked at it from this angle and it has not drawn our attention in the past. So I am not able to make any comment instantly. Sir, it is the product mix. So lower value products we have sold more in this quarter. Is that how it is? Yes.

Highlights a potential negative realization trend in the non-agrochemical segment, which management initially couldn't explain but later attributed to product mix.

Asked by Viraj

Pre-buy in Non-Agchem due to Tariffs Direct
See, we had gone through one short period of time when the President of the USA had increased the tariff rate to 125% over and above the existing tariffs. So people were not very much encouraged, they were in fact discouraged. Then suddenly, we brought it down from 125% to about 30%. That excited the customers and they rushed to buy as much as they could, fearing that it may go up to again 100% or so. So that was a short period of time when people bought in a very good quantity.

Provides historical context on how tariff changes can influence buying patterns in the non-agrochemical business, though management stated current buying was normal.

Asked by Viraj

Sustainability of Agchem Gross Margin Expansion Direct
See, we have gone through a very difficult period in our business in the last 2 years. Particularly, about 1-1/2 years' back, when there was a lot of inventory in the channel and the prices had taken a very severe beating. That had also affected our gross margin substantially. Now, the gross margins have gone back to the normal and what you are comparing is with the period which was abnormal.

Explains that the current high gross margins are a return to normalcy after an 'abnormal' period of price pressure and inventory buildup, suggesting sustainability.

Asked by Viraj

Sustainability of 25% Sales Growth in Q1 Direct
No, it was very normal. The customers were buying their normal requirement. In some cases, of course, the tariff matter which is being discussed by the current US President, this has been exciting and also depressing some people, but that is not very much. Our customers are about their normal requirements and not very excited to buy more. Yes, please.

Management confirms that the strong Q1 sales growth was due to normal demand and is sustainable, not driven by pre-buying due to tariff anticipation.

Asked by Rudraksh Raheja

Impact of China Tariffs on Business Direct
Very little because today, China is considered to be a factory to the world. So even US does not have much of an alternative sources to source from. And we are able to pass on all the tariff increase to the customers in US and they gracefully accept it, knowing what the situation is.

Management indicates minimal impact from China tariffs, citing China's irreplaceable role as a source and their ability to pass on costs to customers.

Asked by Rudraksh Raheja

Discrepancy in Gross Margin vs EBITDA Margin Guidance Partial
It may go towards 18% or little more than 18%. There is no precise calculations for this. This is our gut feeling and impression. No, our EBITDA margin estimates earlier were on the lower side of 15%. Now, it is on the higher side of 15%.

Analyst questioned why EBITDA margin guidance wasn't raised more given gross margin expansion. Management provided a directional 'gut feeling' for higher EBITDA margins, revising their internal estimate.

Asked by Himanshu Binani

2 min read 5 chapters

Detailed narrative

Strong Q1 FY26 Performance Driven by Market Recovery

Sharda Cropchem delivered a robust Q1 FY26, with total revenue growing by 25% year-on-year to ₹985 crores. This performance was primarily attributed to a global revival in demand and a recovery in pricing across the agrochemical market. Overall volume growth stood at 13%, indicating healthy underlying demand. The company's management highlighted that inventories have normalized across distribution channels, signaling a healthier market environment.

Significant Margin Expansion and Profitability Boost

The quarter saw a substantial expansion in profitability, with gross margins increasing by 630 basis points to 35.5%. This improvement was driven by stabilizing input costs and favorable foreign exchange movements, particularly the Euro-dollar exchange rate. Consequently, EBITDA grew by 67% year-on-year to ₹142 crores, achieving an EBITDA margin of 14.4%. Net profit (PAT) surged by an impressive 424% to ₹143 crores compared to ₹27 crores in Q1 FY25.

Segmental Growth and Regional Contributions

Both key business segments contributed to the growth. The Agrochemical segment's revenue increased by 25% year-on-year to ₹846 crores, with volume growth of 11%. The non-agrochemical segment saw a 31% year-on-year revenue increase to ₹139 crores, accompanied by a significant 59% volume growth. Europe remained a major contributor to overall growth, with gross margins in the region at 43%, compared to 26% in NAFTA and 28% in LATAM.

Strategic Capital Allocation and Healthy Balance Sheet

The company maintains a strong financial position, operating as a debt-free entity with cash and liquid investments totaling ₹791 crores as of June 30, 2025. Working capital days improved by 18 days to 100 days, reflecting enhanced operational efficiency. For FY26, Sharda Cropchem plans a CAPEX of ₹400-₹450 crores, primarily aimed at increasing product registrations, which stood at 2,981 as of June 30, 2025, with an additional 1,021 applications pending approval.

Outlook and Key Guidance for FY26

Management reiterated its guidance for FY26, expecting revenue to grow by 15% with EBITDA margins in the range of 15%-18%. They anticipate gross margins to remain in a similar range as Q1 FY26. While acknowledging rising freight costs due to global conflicts, the company expects foreign exchange levels to remain stable and foresees a slow but steady improvement in pricing. Management also expressed a 'gut feeling' that EBITDA margins could potentially move towards or slightly above 18%.

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