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    S H Kelkar and Company Q1 FY27 earnings call

    SHK
    Chemicals·29 Jul 2026
    Management Summary

    S H Kelkar and Company Limited reported a solid Q1 FY27, with consolidated revenue growing 14% year-on-year to ₹662 crore and EBITDA rising 21% to ₹89 crore, leading to an EBITDA margin improvement to 13.4%. This performance was driven by strong growth in the Flavour segment and healthy contributions from Fragrances in Europe and international markets. However, the company noted continued geopolitical volatility, a softer Global Ingredients business, and an increase in net debt to ₹852 crore, while maintaining a cautious outlook on the operating environment.

    Highlights

    5

    • Consolidated revenue grew 14% Y-o-Y to ₹662 crore.

    • Consolidated EBITDA rose 21% to ₹89 crore.

    • EBITDA margin improved to 13.4% from 12.6% in Q1 FY26.

    • Flavour segment recorded strong broad-based growth, contributing ₹112 crore in revenue.

    • Successfully passed on cost inflation to over 95% of clients, ensuring margin protection.

    Concerns

    4

    • Geopolitical developments are keeping energy, freight, and trade volatility high.

    • Net debt increased by ₹65 crore during the quarter to ₹852 crore as of June 2026.

    • Global Ingredients business saw a softer quarter due to lower demand in select export markets.

    • India Fragrance business was soft year-on-year due to a high base and conscious exit from low-margin businesses.

    Key financials

    Single quarter

    05 metrics
    1. 01Revenue from Operations₹662 Cr+14.0%YoY
    2. 02EBITDA₹89 Cr+21%YoY
    3. 03EBITDA Margin13.4%
    4. 04Net Debt₹852 Cr
    5. 05Exceptional Income (Insurance Claim)₹30 Cr

    Segment breakdown

    Flavour
    ₹112 Cr Revenue
    List

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Capex

    ₹25 crores this quarter · ₹100 crores (FY27) planned

    Debt

    Net ₹852 crores

    Liquidity

    Liquidity disclosed

    Strategic inventory buildup to ensure supply security for customers in an uncertain geopolitical environment.

    Guidance & targets

    11
    CategoryTargetPriority
    Profitability
    Full Year Margins
    improved
    		High
    Profitability
    EBITDA Margin (Absolute Numbers)
    similar to Q1
    		Medium
    Segment Performance
    Flavours Business Performance
    outperform previous year's trend
    		High
    Tax Rate
    Effective Tax Rate (ETR)
    less than 30%
    		High
    Return on Capital Employed
    ROCE (European Business)
    17-18%
    		High
    Return on Capital Employed
    ROCE (Group)
    excess of 15%
    		High
    Debt
    Debt Reduction
    approx. ₹25 crore quarter-on-quarter
    		High
    Insurance Claim
    Full Settlement of Fire Incident Claim
    full settlement
    		High
    New Market Initiatives
    EBITDA Breakeven for Germany, USA, UK
    breakeven
    		High
    Revenue
    Revenue Doubling
    double
    		Medium
    Capacity
    Vanvate Factory Operationalization
    operational
    		High

    What to watch in Q2 FY27

    5

    Debt Reduction

    From Q3 FY27 onwards
    CurrentNet debt increased by ₹65 crore to ₹852 crore as of June 2026.
    TargetReduction by approximately ₹25 crore quarter-on-quarter.

    Why it matters

    Tracking the company's commitment to deleveraging the balance sheet after strategic investments and inventory buildup.

    from the third quarter, it will start to reduce. And our expectation is that every quarter, we will continue to reduce by approximately Rs. 25 crore quarter-on-quarter thereafter.

    Risks & concerns

    5
    RiskSeverity

    Geopolitical Volatility

    Geopolitical developments in West Asia are keeping energy, freight, and trade volatility high. — Management acknowledged

    high

    Macroeconomic Environment Uncertainty

    The company is cautious on the overall macroeconomic environment and its impact on demand. — Management acknowledged

    medium

    Supply Chain Disruptions

    Global Ingredient business is directly affected by supply chain disruptions, leading to a softer quarter. — Management acknowledged

    medium

    Demand Volatility Across Quarters

    The pace of revenue growth may vary across quarters depending on the timing of demand and orders. — Management acknowledged

    medium

    Global Macro Disruptions Impact on Long-Term Growth

    Major disruptions on the global macro are the main concern for achieving long-term revenue doubling targets, as they affect product adoptions and pipeline. — Management acknowledged

    high

    Q&A highlights

    7

    “I think we did Rs. 112 crore revenue for Flavours this quarter and ballpark Rs. 95 crore would be on a normal basis... Q1 last year was quite a strong quarter in comparison. And we have taken conscious decision, as we pointed out in quarter 4 to exit from some low-margin businesses, and we have kind of held back on our sales to clients...”

    Clarifies the one-off nature of high Flavours revenue and explains the softness in India Fragrance, indicating strategic shifts and a high base effect.

    asked by Abhijit Akella

    2 min read5 chapters

    Detailed Narrative

    01

    Q1 FY27 Performance Driven by Flavours and Margin Expansion

    S H Kelkar and Company Limited commenced FY27 with a strong performance, achieving a 14% year-on-year growth in consolidated revenue from operations to ₹662 crore. This robust top-line growth translated into a 21% increase in consolidated EBITDA to ₹89 crore, with the EBITDA margin expanding to 13.4% from 12.6% in the prior year's corresponding quarter. The Flavour segment was a key driver, contributing ₹112 crore in revenue, though management noted about ₹15 crore was due to order preponement. The company considers this a 'baseline normal quarter' and expects similar performance going forward⏳.

    02

    Strategic Investments in R&D and Global Expansion Continue

    The company is actively investing in strengthening its R&D capabilities and expanding its global Creative Development Centers (CDC) network, particularly in new markets like Europe, USA, and UK. These investments, while incurring near-term costs, are deemed crucial for winning larger briefs and building differentiated positions across categories. The European business, which recently completed its Q1 capex of ₹25 crore, is expected to achieve a Return on Capital Employed (ROCE) of 17-18% in the longer term, with new initiatives in Germany, USA, and UK targeting EBITDA breakeven in their third year of operation.

    03

    Capital Allocation Focused on Capacity and Debt Reduction

    Capital expenditure for Q1 FY27 included ₹25 crore for European operations, which are now complete. An additional ₹25 crore is planned for the Vanvate factory in Q2, with ₹50 crore earmarked for other India plants, including a potential ₹25 crore for Vashivali upgradation that might be deferred to Q1 FY28. Net debt increased by ₹65 crore to ₹852 crore as of June 2026, primarily due to strategic inventory buildup and capital deployment. Management anticipates debt levels to remain high in Q2 but expects a reduction of approximately ₹25 crore quarter-on-quarter starting from Q3 FY27.

    04

    Proactive Raw Material Management and Pricing Strategy

    Despite ongoing raw material volatility, the company maintained stable gross margins through a favorable product mix and proactive raw material planning, securing 6 months of inventory visibility. This strategy enabled the company to successfully pass on cost inflation to over 95% of its clients, ensuring margin protection. For clients who were reluctant to accept price corrections, supplies were withheld until negotiations were completed, which contributed to the softness observed in the domestic fragrance sales for the quarter.

    05

    Global Ingredients Softness and Insurance Claim Update

    The Global Ingredients business experienced a softer quarter, marked by lower demand in select export markets and direct impact from supply chain disruption🌐s. Management expects a recovery in this segment during the second half of FY27. Additionally, the company recognized an exceptional income of ₹30 crore from an insurance claim related to a fire incident. The claim process is progressing well, with an estimated ₹50-60 crore still pending, and full settlement is anticipated within the current financial year.

    This is an AI-generated summary of a publicly available earnings call transcript.