S H Kelkar & Co.

S H Kelkar & Co. reported an adjusted EBITDA of Rs. 83 crores for Q4 FY26, with a margin of 13.5%, demonstrating sequential stability. For the full fiscal year 2026, the EBITDA margin stood at 10.2%. The company executed a one-off^📎 sale of approximately INR 35 crores of low-margin products as part of its ongoing portfolio optimization. Furthermore, foreign exchange movements contributed 3-3.5% to revenue growth for both the fourth quarter and the full year.

The company has invested significantly in its growth platform, with past capex of Rs. 350 crores over the last few years and an annual opex of Rs. 80-85 crores for development centers. The Almere factory in the Netherlands is now fully operational, addressing previous capacity constraints in Europe. The Vanavate facility in Maharashtra is expected to commence operations in the coming months, and the Vashivali facility, impacted by a fire incident, is being rebuilt and is anticipated to be available by Q3 FY27. These additions are crucial for future operational capacity and regional business ramp-up.

The operating environment remains dynamic, with raw material prices witnessing increases upwards of 12-13% across the board, driven by geopolitical developments. Management is actively managing this by ensuring raw material supply through contracts and maintaining 2-3 months of inventory. The company is confident in its ability to pass on price increases to customers and expects to maintain gross margins at 40% plus and adjusted EBITDA margins at 13% for the first half of FY27, despite inflationary pressures.

S H Kelkar is pursuing a diversified growth strategy across geographies. The mature Indian fragrance and flavors businesses continue to provide steady engagement and growth. Middle East and Southeast Asia are identified as regions for rapid growth in the interim 3-4 years, supported by new facilities. New markets like the US and Europe (Germany, UK) are considered long-term 'seeds' for growth, with the US having already secured $1 million in contracted business and Europe targeting a restoration to fast double-digit growth.

The company's gross debt stood at Rs. 851 crore at the end of March. While a long-term target is to reduce debt by 10% annually, a temporary increase in borrowing levels is expected in the next 3-6 months due to strategic inventory build-up and ongoing capex completion. The planned capex for FY27 is around Rs. 140 crore, largely front-ended in the first two quarters. The cash conversion cycle is currently around 140 days and is expected to remain at this level, reflecting the strategy of holding higher inventory in an inflationary environment.

Despite a fluid global environment, the company is focused on protecting margins, ensuring supply security, and optimizing its product portfolio by exiting structurally low-margin businesses. Management is confident in achieving over Rs. 300 crore EBITDA for FY27. The strategy involves leveraging new capacities and development centers to drive growth in key international markets, while maintaining strong customer relationships and a diversified presence to capitalize on emerging opportunities.