Detailed Narrative
Revenue Contraction and Pricing Dynamics
Operating income fell 26.7% YoY to ₹1,100 crores in Q2 FY26, primarily driven by a sharp decline in raw material prices. Styrene monomer prices, which were around $1,100 last year, dropped to $940 by June 2025 and further to approximately $800 in October. This deflationary trend led to processor destocking and inventory losses, though management declined to quantify the exact financial impact.
ABS Capacity Expansion and Revised Guidance
The company successfully commissioned its 70,000 TPA ABS Phase 1 plant in technical collaboration with Versalis. However, due to initial plant delays, management revised its FY26 volume guidance for ABS down to 15,000 tons from the previous 20,000-25,000 ton range. Phase 2, adding another 70,000 TPA, is on track for completion by FY28 with an estimated capex of ₹300 crores.
Global Trade Barriers and the China Factor
Management highlighted significant shifts in global trade flows due to US tariffs on Chinese goods, forcing China to run its polymer plants at only 50-60% utilization. With China adding 2 million tons of styrene capacity, there is a persistent threat of aggressive polymer exports into India. While India currently imports ~160,000 tons of ABS annually, Supreme Petrochem expects its domestic production to eventually displace these imports once OEM approvals (taking 3-6 months) are secured.
Strategic Delay of Panipat Project
The proposed Panipat (Haryana) plant has seen its timeline pushed significantly to 2029. This delay is contingent on Indian Oil Corporation's (IOC) styrene monomer plant, which has also been delayed. Management stated they will not commit capital to the project until IOC's plans are firmly established, reflecting a disciplined approach to capital allocation.
Financial Health and Shareholder Returns
Despite the earnings dip, Supreme Petrochem remains debt-free with an investible surplus of ₹522 crores. All ongoing capex, including the ₹600 crore total investment for ABS Phase 1 and the upcoming ₹300 crore for Phase 2, is being funded through internal accruals. The board's decision to recommend a 125% interim dividend signals confidence in the company's long-term cash generation capabilities.