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    S H Kelkar & Co.

    SHK
    Chemicals·9 Feb 2026
    Management Summary

    S H Kelkar & Co. reported a 10% Y-o-Y revenue growth for 9M FY26, reaching ₹1,718 crore, despite a softer Q3. The company is in an intensive investment phase, expanding global Creative Development Centres and manufacturing capacities in the US, Europe, and India. While this has led to increased debt and depressed short-term margins, management anticipates adjusted EBITDA margins to reach 17% within two years and ROCE to hit 20% post a three-year build-up phase, driven by new market opportunities and operational efficiencies.

    Highlights

    5

    • 9M FY26 consolidated revenue grew 10% Y-o-Y to ₹1,718 crore, demonstrating resilient demand across core categories.

    • US Creative Development Centre secured its first customer order, a key milestone in global expansion.

    • New facilities in Europe and India are expected to be operational by Q4 FY26 and Q1 FY27 respectively, enhancing capacity.

    • Management confirmed being at peak opex in dollar-euro terms, with no significant further increases expected.

    • Gross margins are directionally improving, with benefits expected to flow in from Q4 FY26.

    Concerns

    4

    • Q3 FY26 performance was relatively softer due to a subdued operating environment and slower ramp-up in certain product categories.

    • Debt levels are expected to see a near-term increase due to ongoing investments and capacity expansion plans.

    • Gross margins in Q3 FY26 were similar to H1 FY26, impacted by Global Ingredients business and currency exchange rates, not yet reaching the 45% level seen in the past.

    • Fragrance EBIT margin is currently depressed at 6-8% due to investments outside India, with recovery targeted at 13-14% in 2-3 years.

    Key financials

    Metrics

    5

    Periods

    2

    Headline

    4
    • Adjusted EBITDA Margin
      13%
    • Gross Margin
      42.4%
    • Gross Debt
      ₹800 Cr
    • Cash on Book
      ₹90 Cr

    9M FY26

    1
    • Consolidated Revenue
      ₹1,718 Cr
      YoY+10%

    Segment breakdown

    Fragrances (India)
    6% EBIT Margin
    Flavours
    20% EBIT Margin
    List

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Capex

    Capex disclosed

    Debt

    Gross ₹800 crores

    Liquidity

    Cash ₹90 crores

    Company expects to receive approximately ₹100 crore from insurance claims within 6-12 months and ₹50 crore from GST refunds within 2-6 months.

    Guidance & targets

    11
    CategoryTargetPriority
    Profitability
    Adjusted EBITDA Margin
    17%
    		High
    Profitability
    Fragrance EBIT Margin (outside India)
    13-14%
    		Medium
    Profitability
    Blended EBITDA (Fragrance)
    17-18%
    		Medium
    Profitability
    Flavours EBIT Margin
    20-22%
    		High
    Return Ratios
    ROCE/ROI
    20%
    		Medium
    Return Ratios
    ROE/ROCE
    14%
    		Medium
    Revenue Growth
    CAGR
    12%
    		High
    Revenue
    US Business Revenue
    $2-2.5 million
    		Medium
    Capacity
    Europe New Facility Operationalization
    Operational
    		High
    Capacity
    India New Facility Operationalization
    Operational
    		High
    Capacity
    Southeast Asia Turnover from new capacity
    5-7 million
    		Medium

    Europe New Facility Operationalization

    next quarter
    CurrentExpected Q4 FY26
    TargetCommercial operations

    Why it matters

    Timely commissioning is crucial for addressing capacity constraints and driving growth in the European market.

    Kedar Vaze: "Quarter 4, the new facility will be operational, maybe end of quarter 4, March is the current expected timeline."

    How to verify

    guidance_and_targets[metric='Europe New Facility Operationalization']

    Risks & concerns

    7
    RiskSeverity

    Challenging operating environment and slow ramp-up

    Q3 FY26 performance was softer due to subdued environment and slower ramp-up in certain product categories. — Management acknowledged

    medium

    Increased debt levels

    Debt levels may see a near-term increase aligned with strategic initiatives and capacity expansion plans. — Management acknowledged

    medium

    Geopolitical and currency volatility impacting gross margins

    Gross margins are affected by geopolitical and currency variables, making it difficult to predict a return to past highs. — Management acknowledged

    medium

    Impact of fire incident on cash flows and capex

    The fire incident has eaten up cash flows and requires attention and capex for recovery and restoration. — Management acknowledged

    medium

    Softness in European demand

    Softness in Europe due to tariffs and geopolitical situations, leading to postponed orders. — Management acknowledged

    medium

    Lower-than-expected demand revival in India

    Demand in India did not see a broad-based jump as expected after GST changes and Diwali. — Management acknowledged

    medium

    Capacity constraints in Europe limiting aggressive growth

    Current European facilities are almost at 85-90% capacity, preventing aggressive growth until new capacity comes online. — Management acknowledged

    medium

    Q&A highlights

    8

    “So, if you look at the global competitive landscape, a couple of large companies, in particular, IFF and Firmenich have undertaken large M&A transactions in the last few years, and they are now sort of reorganizing themselves, and this gives opportunity for midsized and the next level of companies to grow into these markets.”

    Management explains the strategic rationale behind significant current investments, citing market consolidation and emerging opportunities for mid-sized players.

    asked by Jatin Chawla

    2 min read6 chapters

    Detailed Narrative

    01

    Q3 & 9M FY26 Performance Overview

    S H Kelkar & Co. reported a consolidated revenue of ₹1,718 crore for the 9 months ended FY26, marking a 10% year-on-year growth. However, the Q3 performance was relatively softer, attributed to a subdued operating environment and slower ramp-up in certain product categories. Gross margins remained broadly stable during the quarter at approximately 42.4%, while adjusted EBITDA margin stood at around 13%, reflecting costs associated with strategic initiatives and organizational strengthening.

    02

    Strategic Investments and Global Expansion

    The company is in an investment phase aimed at positioning for future growth in global Fragrances and Flavours markets, particularly in the US, UK, Germany, and UAE. These investments include strengthening Creative Development Centres and expanding capacity. The US Creative Development Centre has secured its first customer order, with a target to achieve $2-2.5 million in business by the end of next year. Management views this as an opportune time to grow, leveraging market consolidation among larger players.

    03

    Capital Allocation and Debt Management

    Current gross debt stands at approximately ₹800 crore, with an expected near-term increase of around ₹100 crore to fund ongoing capex. Planned capital expenditure includes EUR 2-3 million for Europe and ₹70-80 crore for India over the next 12-18 months, in addition to $1.5-2 million already invested in the US development center. The company expects to receive approximately ₹100 crore from insurance claims within 6-12 months and ₹50 crore from GST refunds within 2-6 months, which will aid liquidity.

    04

    Margin Outlook and Drivers

    Gross margins are expected to progressively improve from Q4 FY26 onwards, as raw material at older prices is utilized and supply stabilizes. The adjusted EBITDA margin, currently at 13%, is targeted to reach 17% over the next two years, driven by operating leverage, new factory efficiencies, and growth in new markets. Flavours segment maintains a strong EBIT margin of 20-22%, while Fragrance EBIT margins, currently depressed at 6-8% due to investments, are projected to reach 13-14% in 2-3 years as new businesses ramp up.

    05

    Capacity Expansion and Operational Timelines

    New manufacturing facilities are critical for future growth. The new European facility is expected to be operational by Q4 FY26 (March 2026), and the new Indian facility (replacing older ones) by Q1 FY27. Europe's capacity is planned to double or increase by 1.5x by Q1 FY27. India's current capacity of 20,000 tons will expand by an additional 9,000 tons in Q1 FY27, followed by another 15,000 tons. These expansions are crucial as the European facilities are currently operating at 85-90% utilization.

    06

    Market Dynamics and Growth Drivers

    The company maintains its long-term 12% CAGR revenue growth target, with FY24-25 as the base year. Growth is anticipated to be strong in Middle East, Africa, and Central Asia. While domestic demand in India has been softer than expected post-GST changes, the company expects to recover sales momentum. The strategy focuses on leveraging innovation and technology, supported by over 25 patents, to capitalize on growth opportunities in new markets, particularly as smaller, e-commerce-driven brands emerge globally.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.